Not Much Holding British Pounds Up; Poised to Break Hard

The British Pound received a boost Thursday morningfollowing a better than expected U.K. retail sales report. Thisrally died, however, short of a breakout above the recent high at 1.5701 andafter sentiment shifted away from risky assets.

The British Pound received a boost Thursday morningfollowing a better than expected U.K. retail sales report. Thisrally died, however, short of a breakout above the recent high at 1.5701 andafter sentiment shifted away from risky assets.

Technically, the Sterlingis trapped between a pair of 50% levels at 1.5560 and 1.5635. Major support isbeing provided by an uptrending Gann angle from the 1.4229 bottom at 1.5529today. A close under this angle could trigger a tremendous downslide.

The resumption of the downtrend in the equities marketstriggered a sharp break in the commodity-linked currencies with the New ZealandDollar leading the way lower. Today’s surprisingly bad U.S. weekly initial claims reportrenewed fears of a shutdown of the global economy. If investors continue to shyaway from risk, then look for further weakness in the Canadian Dollar andAustralian Dollar also.

One question traders are asking each other is whether theDollar is trending or if it is rangebound. On one hand some traders believe ina bullish scenario for the Dollar because of flight to safety buying. Bearishtraders believe the U.S.economy will grow at a slower rate than the rest of the world. This clashbetween the fundamentals could produce side ways action highlighted by periodicexaggerated swings.

Technically, the Aussie rally failed this week at the 50%price level of the .9221 to .8857 range at .9039. This move has set up adeveloping bearish secondary lower top. Based on the current chart pattern,look for further weakness with .8644 the next downside target.

Earlier this week the New Zealand Dollar completed a 50%retracement of its recent downswing. The range from .7355 to .6996 endedslightly above the .7175 level at .7191. The charts are suggesting a move to.6977 to .6879 is likely over the nearterm.

On Thursday, the U.S. Dollar rose sharply as risk aversionis back on following a surprisingly weak U.S. jobless claims report.Especially hit hard during the Greenback’s rally were the commodity-linkedcurrencies.

The Euro traded lower after a weak attempt to rally failedafter the bearish U.S. report and on the heels of a better than expectedforecast for German economic growth.

Technically the Euro is still rangebound amid confusion bytraders. Buying and selling interest appears to be even as the bulls want tobuy Euros on speculation of renewed strength in the Euro Zone economy but thebears feel the need to sell because of a dim outlook for the global economy.

The charts indicate impending volatility but the directionof the next move is not clear. A breakout to the upside is likely to be metwith selling pressure at 1.3033 to 1.3104. A breakdown through support couldtrigger a downside acceleration to 1.2605 to 1.2433.

The USD JPY started the day in a potentially bullishposition as it tried to build support inside of a retracement zone at 85.36 to85.55. At one time today, it looked as if the Dollar/Yen was readying tobreakout above the last swing top at 86.37. This move would’ve changed thedaily trend to up.

This pair sold off sharply after the U.S. released a surprisingly badweekly initial claims report. U.S.equities sold off on the news, triggering a flight to safety rally in the JapaneseYen. Unless this market can regain the retracement zone, look for 84.73 tofail. This would put the Dollar/Yen a new multi-year low.

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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