British Pound Weakens after Testing Main Top at 1.4769

The British Pound is under pressure this morning as buyingdried up as the market approached the June 2nd top at 1.4769. Inaddition to this resistance price, traders may have also shied away from thelong side because of the 50% level at 1.4810.

The British Pound is under pressure this morning as buyingdried up as the market approached the June 2nd top at 1.4769. Inaddition to this resistance price, traders may have also shied away from thelong side because of the 50% level at 1.4810.

Technically the GBP USD has been taking on a bullish tonefollowing the formation of the secondary higher bottom at 1.4345. This currentchart formation suggests that the main trend is gearing to turn up following abreak out over 1.4769. Investors may be afraid to buy strength at this timeleading to speculation that the market may test a 50% level at 1.4499 beforemoving higher.

Fundamentally, news that the Bank of England’s latestinflation survey showed a surge may be helping to pressure the British Poundthis morning. The BoE’s survey found that median expectations for the inflationrate over the coming year were 3.3%, up from 2.5% in February. This spike tothe highest level since August 2008 may raise concerns among policymaker’s whohad expected the number to recede after stimulus measures were wound downearlier in the year.

The BoE’s Monetary Policy Committee has been downplayinginflationary concerns lately, considering it a temporary condition. This weekthe MPC voted to leave interest rates unchanged. This was a sure sign thatinflation is not their primary concern at this time. The policymakers willnonetheless be keeping their eye on inflation over the next few months.

Overnight the U.K. reported that manufacturingoutput fell 0.4% in April, compared to April 2009, output was up 3.4%. Tradershad been looking for a monthly rise of 0.4% and an annual increase of 2.8%.This report indicated that the U.K.economy is recovering but sluggishly.

Besides the implementation of new austerity measures and aFitch Ratings commentary suggesting the U.K. should accelerate its budgetcutting plans, British Pound investors now have to worry about inflation.Although the BoE wants to downplay the number, investors have to be concernedabout it because it may mean the BoE will be forced to increase interest ratessooner than expected. A premature hike in interest rates could help to derailthe economic recovery taking place and along with new austerity measures may bea little too much of a shock for the economy at this time.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

Disclainer: