Weak Economic News Pressures British Pound

The British Pound fell against the Dollar amid reports thatshowed the U.K.’sM4 money supply unexpectedly dropped in August and mortgage lending continuedto slow in July. Traders were also paring positions ahead of the release of theBank of England minutes on September 22.

The British Pound fell against the Dollar amid reports thatshowed the U.K.’sM4 money supply unexpectedly dropped in August and mortgage lending continuedto slow in July. Traders were also paring positions ahead of the release of theBank of England minutes on September 22.

Technically, look for the GBP USD to continue to weaken intoa short-term retracement zone at 1.5512 to 1.5461. An uptrending Gann angleinside this zone could provide additional support. Watch for the market tosettle into this zone or encourage profit-taking following the break.

The USD JPY lost a little ground as traders pared longpositions ahead of the FOMC meeting. Trading has been in a tight range sincelast Wednesday’s intervention. Fear that the Fed may decide on additionalquantitative easing weakened the Dollar versus the Yen.

Technically, the Dollar/Yen is having trouble breakingthrough a pair of tops at 85.90 and 85.91. Once this area is cleared, thecharts indicate there is room to the upside. The best case scenario has thismarket eventually rallying to a major 50% price level at 88.93, but this is notlikely to occur unless Japanese officials intervene once again. On the downside, a test of a retracement zoneat 84.40 to 84.04 is likely to attract fresh buying.

The U.S. Dollar traded slightly lower versus the Euro astraders factored in the possibility of more monetary policy easing by theFederal Reserve at tomorrow’s Federal Open Market Committee Meeting.

The FOMC is not expected to take action on interest rates,but may announce another round of bond purchases, known as quantitative easing.This action is supposed to act as stimulus to help revive the ailing U.S.economy.

Since the summer, a series of economic reports haveindicated that the U.S.economy is stalling. Although a double-dip recession is now a remotepossibility, based on recent Fed language, the central bank feels that theeconomy has slowed down enough to warrant further quantitative easing.

On Monday the Euro held on to its slight gains despite morerumors of sovereign debt problems in Irelandand Portugal.One analyst described the situation as “ugly” particularly in the Irish andPortuguese bond markets.

Technically, the EUR USD had an inside day followingFriday’s closing price reversal top. Overnight, bullish traders defended lastFriday’s low at 1.3019, thereby preventing the confirmation of the reversalpattern. A confirmation of this pattern could trigger the start of a break to1.2901. A trade through 1.3159 will negate the pattern and should trigger anacceleration to the upside. Throughout the day, the Fibonacci level at 1.3049provided support.

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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