Tuesday November 9, 2010 - 04:19:39 GMT
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Profit-taking Pressures British Pound
The British Pound weakened against the U.S. Dollar on
Monday. Oversold conditions may have been the biggest contributing factor to
the weakness. Spillover selling pressure triggered by the sovereign debt issues
may have encouraged some traders to pare back profitable positions. Overall the
Dollar was strong because of the shedding of risky assets.
On Tuesday, traders will be watching a key U.K. industrial
report. Industrial output is expected to increase for the third consecutive
month in September. Pre-report guesses are for this report to show an increase
of 0.4%. Anything greater than this amount, is likely to fuel a bullish
reaction in the GBP USD.
Last week the Bank of England decided to take a wait-and-see
approach as it decides on whether to inject additional stimulus into the
market. With inflation holding above the governmentâ€™s 3% limit for price
growth, a better than expected industrial number could mean the BoE will
refrain from applying additional quantitative easing for at least the remainder
of the year.
Technically, the main trend is up on the daily chart. On
Monday, the GBP USD broke uptrending Gann angle support at 1.6210. This is a
sign of weakness and could be indicating a further decline into a retracement
area at 1.5974 to 1.5897. On Tuesday, an uptrending Gann angle comes in at
1.5930. Based on the speed of this angle, it will cross 1.5974 on November 11
If the industrial report comes out bullish, look for the
market to make an attempt to regain the angle at 1.6210. If it can sustain the
rally over this angle, then look for an upward bias to build.
The inability to regain the angle means a test of 1.5974 is
likely by the end of the week.
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