Speculators Paring British Pound Positions after Weak Retail Sales

After changing the main trend to upon the daily chart on the breakout through 1.5911, the British Pound appears tobe shifting to a corrective mode which may mean the start of a short-termcorrection to 1.5702 to 1.5618.

After changing the main trend to upon the daily chart on the breakout through 1.5911, the British Pound appears tobe shifting to a corrective mode which may mean the start of a short-termcorrection to 1.5702 to 1.5618.

Overbought conditions and the lackof buying interest at the current price level seem to be the two main reasonsfor anticipating a near-term pull-back. While the uptrend is expected to remainintact, bullish traders may be lightening up on their long positions, choosinginstead to wait for a correction into a value area.

A downtrending Gann angle from the1.6299 top is providing resistance at 1.6019 today. On the upside, anuptrending Gann angle from 1.5345 is expected to supply support at 1.5705. Itis highly unlikely that it will be tested, but a support price cluster hasdeveloped at 1.5705 to 1.5702.

Fundamentally, earlier in the week areport showing inflation in the U.K.is accelerating boosted speculation that the Bank of England may be forced toraise borrowing costs to curb price growth. This drove the British Pound to ahigh of 1.6059 before buying dried up.

Long traders pared positions in thePound triggering a sell-off after a report showed U.K. retail sales declined the moston record for a December. Rising prices and heavy snowfalls restricted consumerspending leading to the weaker number.

The Sterling sold off on the poor retail salesdata because it took some of the pressure off the Bank of England to liftrates.

Overall it appears speculators arelightening up positions until more concrete economic data becomes availablesupporting a possible rate hike later in the year. Rather than chasing themarket higher, investors seem to be willing to wait for more favorable pricing.

Forfurther information on this and other Pattern, Price & Time products visitour website at www.patternpricetime.com

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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