Tuesday August 24, 2004 - 07:58:13 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling faces 1.80 test
Sterling will still be vulnerable on speculation that UK interest rates are close to peaking, although international developments are likely to dominate for now, especially with a lack of UK data. Long Sterling positions offer little immediate value beyond 0.6720 against the Euro. Sterling is likely to be capped below 1.8150 against the US currency for now and is liable to face test of crucial support at 1.80 within the next 24 hours.
Sterling retreated to a low of 1.8030 against the US currency before pushing back to 1.8075 in early Europe on Tuesday. Sterling, however, rallied to 0.6720 against the Euro.
There are no significant indicators this week and no major data releases until next week, although the second-quarter GDP revisions may see more interest than usual on Friday. The markets will continue to speculate over a slowdown in the UK economy and house prices. In this environment, Sterling will remain vulnerable to selling pressure, especially if confidence over the global economy revives.
The immediate focus is likely to be on the Sterling rate against the US dollar. A retreat below the 1.80 level against the US currency could further damage Sterling's technical position against the US currency and could create speculation over a move to at least 1.78. There is likely o be a tough battle close to 1.80.
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