Weak U.K. Economy Could Deflate British Pound

The British Pound is trading flat to slightlyhigher this morning after it was reported that the U.K. economy unexpectedlycontracted in the final quarter of 2010. Fourth-quarter gross domestic productdeclined by 0.5% compared to the previous quarter.

The British Pound is trading flat toslightly higher this morning after it was reported that the U.K. economyunexpectedly contracted in the final quarter of 2010. Fourth-quarter grossdomestic product declined by 0.5% compared to the previous quarter. This wasthe first decline since the third quarter of 2009. The report also severelymissed pre-report forecasts calling for a 0.4% rise.

While the Office for NationalStatistics wanted to blame the bulk of the decline to weather, economistslooked at the dept of the contraction. The developing concern centers on acombination of tighter fiscal policy and low interest rates. Historically, this combination has not beenvery supportive for the currency.

Technically, upside momentum hasslowed in the British Pound over the past four-days. A downtrending Gann anglefrom the 1.6299 top at 1.6009 today has been providing the resistance. Closingabove this price will put the market on the bullish side of the angle, signalingperhaps the start of the next rally.

Should near-term resistance continueto develop, look for the start of a break which could lead to a move to theuptrending Gann angle support at 1.5745.

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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