GBP USD under Pressure Following Weekly Reversal Top

This morning the GBPUSD is trading lower following last week’s spectacular closingprice reversal top. Based on the short-term range of 1.5345 to 1.6400,expectations are for a test of the retracement zone at 1.5873 to 1.5748.

This morning the GBPUSD is trading lower following last week’s spectacular closingprice reversal top. Based on the short-term range of 1.5345 to 1.6400,expectations are for a test of the retracement zone at 1.5873 to 1.5748.

Traders should watchfor profit-taking to trigger a technical bounce in this zone if tested,especially since an uptrendingGann angle comes in at 1.5865. This creates a nice support cluster at whichshort-traders will likely consider lightening up or bullish traders will use asa lean.

The BritishPound/U.S. Dollar has been weakening since late last week after minutes of theBank of England’s March 9-10 Monetary Policy Committee meeting showed the panelvoted 6-3 to leave rates on hold.

Although threemembers voted to hike rates, the main considerations for the committee’s policydecision remained the same. Uncertainty continues to exist over the medium-termoutlook for both activity and inflation. Traders, however, had been leaning onthe side of an improving economy and higher rates, thereby accounting for therecent rally.

Additional sellingpressure in the British Pound came following the release of British Chancellorof the Exchequer George Osborne’s 2011/12 government financial budget plan.Although he said the government’s deficit-reduction efforts remained on track,he also added a weaker forecast for 2012 growth, a lower corporate tax rate andfuel tax and adjustments to the bank levy.

The outlook forlower future economic activity seems to be the main worry for the U.K. governmentat this time. This means that concerns about inflation may have to take a backseat for the time being. This supports my overall conclusion that the MonetaryPolicy Committee members are more likely to take a “wait and see” attituderegarding interest rates at this time. Last week’s break and today’s subsequentfollow-through to the downside support this conclusion.

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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