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Daily Analysis Article

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Has the pound gotten overextended on this run?

Tue, Aug 4 2009, 18:53 GMT
by Ralph Shell

ForexRazor

EUR/USD Commentary and Trade Ideas

After yesterday's bull run to new highs for the year, the pair has taken a well deserved breather in the 1.44 vicinity. The pause in the global equities rally is cited as a reason for the EURO's consolidation, however the market acts like there may be some entity offering ample currency for sale above 1.44. This is not to say the seller(s) will change their mind and their orders but that is how the market acts. Economic reports on both sides of the Atlantic were greeted with yawns. Debate continues on the impact of oil prices and the recovery. Oil prices below $50/ barrel were probably as big a stimulant to economic recovery as the Washington activity, and each day prices are above $70 will prove very harmful. The world had better look for a country other than the US, for the economic recovery leader. It is difficult to calculate how this impacts current markets but the trend is obviously up, so look for a retracement to scalp this market from the long side.

Bias: Higher Bias Term: Medium Support: 1.4320 1.4270 1.41.50 Resistance: 1.4420 1.4500 1.4590

 GBP/USD Commentary and Trade Ideas 

After achieving the 1.70045 level early today, the pound has since retreated to the 1.69 level. UK home prices and sales had in the past several months been cited as a reason for the pound's strength, but this mornings positive US housing sales report has seemingly little impact on the dollar. Has the pound gotten overextended on this run? If so a retreat back to the 1.6750 level might be a place to try the long side. There seems to be war going on between the fundamentalist and the technicians regarding the pound. The IMF and others steeped in fundamentals question the pounds ability to maintain the current level. When donning my technician's hat however, there appears to be some counts that would carry the pound well up into the mid 1.70's. The equity run is the final judge, and for the time being the trend is up.

Bias: Higher Bias Term: Long Support: 1.6830 1.6750 1.6590 Resistance: 1.7000 1.7120 1.7250

USD/JPY Commentary and Trade Ideas 

Today's spurt in global equities has relegated the yen to the bottom of the pill, and even the maligned dollar can gain by comparison. We are currently trading at 95.15 bouncing up from a 94.60 low. Inclined to scalp the long side if the market relaxes a bit, with a target back in the 96 area.

Bias: Higher Bias Term: Medium Support: 95.00 94.40 93.20 Resistance: 95.60 96.20 96.90

 USD/CHF Commentary and Trade Ideas

This pair seems to have found some support under the 1.06 handle and is currently trading a few pips above 1.06. Switzerland's biggest bank, UBS, reported losses for the third quarter in a row. So far there is no sign of SNB intervention, but traders seem cautious selling the dollar much below 1.06, perhaps fear intervention. Prefer the long side on weakness in through here.

Bias: Higher Bias Term: Medium Support: 1.0570 1.0500 1.0420 Resistance: 1.0650 1.0700 1.0850

USD/CAD Commentary and Trade Ideas

Back from the Canadian Bank holiday, we once again have crude oil and equities strength helping the CAD. The relative strength is under 30, a warning sign that this pair will need more good news to fuel the CAD rally versus the USD. Canada is an aggressive developer of oil and natural gas, and as the US's largest energy supplier and benefits immensely from higher energy prices. Though the obvious trend is further USD weakness, the bulk of the move may be behind us. No trading suggestions today.

Bias: Neutral Bias Term: Medium Support: 1.0620 1.0550 1.0450 Resistance: 1.0690 1.0740 1.0850

AUD/USD Commentary and Trade Ideas 

Lower equities gave us a minor pullback in the AUD from yesterday's high or 84.69 to around .8425. It was reported that the index of Australian commodity prices was down from the previous period by 3.5%, indicative of soft export demand. The central bank maintained the bank rate at 3%, but acknowledged the economy is sluggish, and further reduction in the central rate is not precluded. No trading suggestions, but the pair is looking a little pricey.

Bias: Higher Bias Term: Medium Support: .8390 .8330 .8200 Resistance: .8450 .8500 .8590

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 NZD/USD Commentary and Trade Ideas 

The Kiwi continues to meander sideways, not far beneath the yearly high of .6711. The market is loaded up long the Kiwi and the AUD on the theory that the Chinese economy and it's appetite for commodities will prop up the Australian and New Zealand economies. No current trading suggestions.

Bias: Higher Bias Term: Medium Support: .6625 .6510 .6420 Resistance: .6690 .6750 .6840

Published on  Tue, Aug 4 2009, 19:12 GMT