Profit-taking Pressures British Pound

The British Pound weakened against the U.S. Dollar onMonday. Oversold conditions may have been the biggest contributing factor tothe weakness. Spillover selling pressure triggered by the sovereign debt issuesin Irelandmay have encouraged some traders to pare back profitable positions. Overall theDollar was strong because of the shedding of risky assets.

The British Pound weakened against the U.S. Dollar onMonday. Oversold conditions may have been the biggest contributing factor tothe weakness. Spillover selling pressure triggered by the sovereign debt issuesin Irelandmay have encouraged some traders to pare back profitable positions. Overall theDollar was strong because of the shedding of risky assets.

On Tuesday, traders will be watching a key U.K. industrialreport. Industrial output is expected to increase for the third consecutivemonth in September. Pre-report guesses are for this report to show an increaseof 0.4%. Anything greater than this amount, is likely to fuel a bullishreaction in the GBP USD.

Last week the Bank of England decided to take a wait-and-seeapproach as it decides on whether to inject additional stimulus into themarket. With inflation holding above the government’s 3% limit for pricegrowth, a better than expected industrial number could mean the BoE willrefrain from applying additional quantitative easing for at least the remainderof the year.

Technically, the main trend is up on the daily chart. OnMonday, the GBP USD broke uptrending Gann angle support at 1.6210. This is asign of weakness and could be indicating a further decline into a retracementarea at 1.5974 to 1.5897. On Tuesday, an uptrending Gann angle comes in at1.5930. Based on the speed of this angle, it will cross 1.5974 on November 11or 12.

If the industrial report comes out bullish, look for themarket to make an attempt to regain the angle at 1.6210. If it can sustain therally over this angle, then look for an upward bias to build.

The inability to regain the angle means a test of 1.5974 islikely by the end of the week.

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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