GBP/USD - Daily Candle Chart 3rd April 2009

GBP/USD - Daily Candle Chart 3rd April 2009

For those of you who followed my advice I hope you managed to take as many pips as possible in the Pound’s surge against the US yesterday and if it were not for the Non Farm Payroll data due out later today my suggestion would be to add to existing long positions.   However, despite the market consensus suggesting that numbers will be far worse than forecast thereby leading to a further weakening of the US dollar nothing in trading is ever so straightforward.  Whilst the numbers may indeed be worse than forecast and more than likely lead to further dollar weakness (see dollar index on my currency options site) we still have to remember that of all the fundamental news items the NFP is the one which causes the most volatility in the currency markets.  One of its characteristics is that upon release the market nearly always moves in one direction and then promptly reverses shortly afterwards.  This knee jerk reaction is generally attributed to an initial reaction to the headline numbers followed by a more considered based on the underlying texts, but in fact in reality is more likely to be due to the major banking players using the opportunities to take stop losses out of the market.  Either way the move is generally the same and the only way to trade it, in my view, is to wait for the first reaction to subside, look for reversal candles and trade in the opposite direction to the initial move.   My preferred timescales are to use the 5 and 10 mins charts but bear in mind that in addition to the NFP we also have a raft of fundamental news following behind, topped off by a speech by Ben Bernanke, so anything can happen in the next 4 hours (and probably will).

From a purely technical view in the pounds to dollars pair we are now trading all three moving averages moving away from the double bottom of the last 2 months and reinforced by the long legged doji in the monthly chart.  However, any further upward move is now running into heavy consolidation and we will need to see an initial break above 1.4925 followed by a move to retest 1.5324 if the bullish trend is to be sustained longer term.

You can keep up to date with all the latest fundamental news, latest currency news and live charts by simply following the appropriate links.  I have also included information on an excellent ECN broker.