British Pound Trying to Break Fib Retracement on Fed Stimulus Speculation

The British Pound is hugging a key Fibonacci retracementlevel against the Dollar amid speculation the Fed will announce a renewal ofstimulus measures to boost the economy at its FOMC meeting on Tuesday.

The British Pound is hugging a key Fibonacci retracementlevel against the Dollar amid speculation the Fed will announce a renewal ofstimulus measures to boost the economy at its FOMC meeting on Tuesday.

The Sterlingis continuing its rally from Friday after forming a new main bottom at 1.5819.Trading has been light with the range tight as the market toys with a majorretracement level at 1.5967. Early last week the Pound made a top at thislevel, leading to the break to 1.5819. The key to sustaining this rally will bea close above 1.5967. Intraday traders should watch to see if support can beestablished at this price level if it can be regained. The uptrend will remainintact as long as the new main bottom at 1.5819 holds as support.

Concerns about the U.S. economy weakening are helpingto make the British Pound an attractive investment at this time. While the U.S. has been struggling to maintain growth, theU.K.economy has remained relatively firm.

Investors have been optimistic about the U.K. currencysince the new coalition government took control in May. Although theyimmediately proposed spending cuts and tax hikes, investors have embraced theirdecisions as necessary for the economy. The fear at the time was that a growingspending deficit would lead to a downgrade of U.K. debt.

Although the U.K.economy remains on path toward sustaining its recovery, some investors stillfeel that some stimulus may be necessary to maintain growth. They cite the taxhikes and austerity measures as the main reasons why the economy may stallduring the third and fourth quarters.

A Fed decision on Tuesday to reintroduce stimulus measuresshould be enough to propel the British Pound higher. Should the Fed back awayfrom a reintroduction of stimulus measures then look for the Sterling to weaken as speculators reassesstheir positions. The Fed is either going to act now because they see thesituation worsening or wait another month because its interpretation of theeconomic data does not warrant immediate action.

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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