Wednesday November 10, 2010 - 20:01:29 GMT
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Forex Hound - www.forexhound.com
Fundamentals, Technicals Drive British Pound Higher
The British Pound strengthened this morning
after the Bank of England said inflation may continue to accelerate above its 2
percent target, reducing the chances that the central bank will reignite asset purchases.
Overnight the BoE said its officials are
having a â€śvigorous debateâ€ť over the risks of inflation. In its inflation
report, the central bank said near-term inflation is expected to be higher than
in August, and consumer price growth above its target through 2011.
Bearish traders got spooked a little
following the report, triggering a mild short-covering rally. While the report
was enough to establish support, buying wasnâ€™t strong enough to mount a
significant challenge against the recent top.
Based on this morningâ€™s action, it looks as
if the BoEâ€™s â€śwait and seeâ€ť monetary policy approach is not likely to change
until the central bank gets a chance to assess further economic releases. After
Tuesdayâ€™s sell-off, it looks as if this morning traders are only making
position adjustments to reflect the central bankâ€™s attitude.
Technically, the GBP USD is trading higher
after testing an important 50% level at 1.5974. In addition, it held
yesterdayâ€™s low at 1.5951. An uptrending Gann angle at 1.5950 forms a support
cluster at 1.5951 to 1.5950. A failure to hold this zone is likely to trigger a
break to the .618 level at 1.5897.
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