GBP USD Rallies as BoE Minutes Suggests Rate Hike

The U.S. Dollar is trading weaker against most majors thismorning ahead of this afternoon’s Fed announcement. Volume is expected to belight, but traders should expect increased volatility because of thin tradingconditions.

The U.S. Dollar is trading weaker against most majors thismorning ahead of this afternoon’s Fed announcement. Volume is expected to belight, but traders should expect increased volatility because of thin tradingconditions.

The big mover overnight is the GBP USD. After an earlysell-off on Tuesday morning, the Sterlingrighted itself following the U.K.budget announcement. Going into the meeting there appeared to be uncertainty.Following the announcement, investors seemed optimistic about the newgovernment’s ability to instill austere financial measures to solidify theeconomy.

Fundamentally the Sterlingreceived a boost overnight after minutes from the Bank of England’s latestinterest rate policy meeting showed one member wanted to raise rates.

Technically the British Pound survived a test of a 50% levelat 1.4686. This morning’s strong rally has created enough upside momentum tochallenge a .618 level at 1.4947. A breakout over this level is likely totrigger an acceleration to the upside.

This morning the EUR USD is trading slightly better inlimited action. On Tuesday, the wasunder pressure most of the day following Monday’s technical closing pricereversal top and renewed European banking concerns following the downgrading ofBNP Paribas earlier in the week.

Traders took profits on long positions and shorts reappliedpressure following a 10 day rally which saw the single-currency rally from1.1876 to 1.2467. Investors are concerned that the Fitch downgrading of BNPParibas may only be the tip of the iceberg as several other banks may be inlineto accept a similar downgrade.

Technically the Euro confirmed Monday’s closing pricereversal top and is well on its way to reaching its first objective at 1.2171,followed by 1.2102. This will be a critical test for the Euro. Bullish traderswill try to build a secondary higher bottom in this retracement zone. If therecent rally was truly only short-covering then this area will be meaninglessas renewed short-selling will dominate the trade.

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

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