Pounds To Dollars - GBP USD Daily Candle Chart 11th february 2009

Pounds To Dollars - GBP USD Daily Candle Chart 11th february 2009

Yesterday’s wide spread down bar has given us an excellent trading signal for pounds to dollars creating a classic three candle reversal to the up trend of the last 2 weeks. The pattern began on Friday, with a wide spread up bar, followed on Monday by an evening star doji, and the pattern was finally completed yesterday with the wide spread down bar, providing the classic reversal signal. We should now expect prices to fall in the next few days, particularly as yesterday’s close was below both the 9 day and 14 day moving averages ( just!). In addition the move seems to have run out of steam as it approached the heavy resistance immediately above. This may of course only be a temporary reversal, but when considering all the elements of the candle pattern, penetration of the moving averages, and the apparent failed move into the resistance, seems to point to a good signal for us.

The main news this morning ( as I mentioned last night ) is the unemployment data due out shortly, with most analysts expecting these figures to top 2m unemployed for the first time in 12 years. Whether the market reacts badly is any one’s guess, but these numbers have been widely trailed this morning already, so they are hardly fresh news. More significantly perhaps we have BOE Governor Mervyn King speaking on inflation. His comments are always closely analysed for any hints as to the future monetary policy for the Bank of England, and if his statement is more hawkish than expected then this is generally good news for the UK pound. The report includes the Banks projection for inflation and economic growth over the next two years ( some hope) and can provide a valuable insight into the bank’s view of economic conditions and inflation – the key factors that will shape the future of monetary policy and influence their interest rate decisions, although if the current market persists then the room for any further cuts is limited to say the least, so in many ways the BOE has very little left to say or do.

This afternoon in the US we have the trade balance figures, which measures the difference in value between imported and exported goods and services during the reported month – a positive number indicates that more goods and services were exported than imported and the forecast is for this to be -37B against a previous of -40.4B, so all in all an interesting day ahead which is why I wanted to get this post up earlier than usual today. My suggested trade for today is small short positions whilst we see how strong the down move will be, and I would suggest stop losses above yesterday’s opening price or above.

The short term outlook is bearish, the medium and long term is sideways.