Mar 17, 2010

Forex Crunch Pound Jumps on Jobs – Breaks Major Resistance

Forex Crunch Pound Jumps on Jobs – Breaks Major Resistance

Pound Jumps on Jobs – Breaks Major Resistance

Posted: 17 Mar 2010 03:24 AM PDT


The number of unemployed Brits fell dramatically – this unexpected improvement sent the Pound higher, sent the Pound above a major resistance line. Will this hold? A big test for GBP/USD – it could mark a long term turnaround.

Claimant Count Change is the earliest and most important employment indicator in Britain. It reflects the number of unemployed people in the UK. After two months of drops, last month’s figure showed a big rise of 23,500 in the number of unemployed people. So, the first surprise for today was that last month’s number was revised to a rise of only 5,300. This is far better. And the big surprise is with the fresh figures:

A drop of 32,300 people was reported in February. This is the biggest drop in unemployment since 1997, and a huge surprise. The unemployment rate (for January) remained unchanged at 7.8%, as expected.

GBP/USD leaps

The British Pound already enjoyed the US dollar’s weakness to rise above 1.5220. As aforementioned, the big hurdle was 1.5350. And this line was just broken! GBP/USD now trades at 1.5360. It’s important to stress that this move needs to be confirmed. A breach of 10 pips is still limited, and it’s too early. We’ll see how the Pound trades through the New York session, which opens earlier due to early DST.

If this break is confirmed, it’s a significant move for GBP/USD. 1.5350 was an important support and resistance line in the past, and also held the Pound back in mid-February. After this line was broken to the downside, GBP/USD collapsed very quickly down to 1.4780.

Long term change?

These great and very surprising employment figures could mean a full recovery, and a shift in the long-term bearish trend.

The next line of resistance is 1.5520, a place where the Pound struggled before falling down. Higher, 1.5833 is a major resistance line that limited the pair’s attempts to rise. It also served as a support line beforehand.

If the break isn’t confirmed, 1.5220 serves as initial support, followed by 1.4870 and then 1.4770. Also note the round number of 1.50, but in the recent days it hasn’t been a significant line.

No New QE

At the same time, the meeting minutes from the last rate decision were released. The meeting minutes showed that all 9 members of the MPC voted to leave the Quantitative Easing program unchanged at 200 billion pounds. The money already ran out of this program, that spills pounds into the markets, and hurts the Pound.

Mervyn King didn’t rule out injecting fresh money into the program, but time passes by and this doesn’t happen. This recovery in jobs makes the chance of this happening very slim.

I’ll keep following the moves of Pound.

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GBP/USD Breaks Up Towards Big Barrier

Posted: 16 Mar 2010 05:26 PM PDT


The British Pound enjoyed the mild FOMC Statement in the US to break above a minor resistance line and approach a much bigger one. Events ahead will probably stop it. Update.

GBP/USD broke last week’s high of 1.5220 and is now trading above 1.5250. This is the highest level in two and a half weeks, the highest in March so far. 1.5220 is a small technical barrier. A bigger hurdle is ahead:

The big hurdle is 1.5350. This line worked as a resistance and support line in May 2009, and supported the pair in mid February, before it made a big collapse downwards. Around 1.5350 there could be many stop orders that will slow the Pound’s movement and possibly send it back down.

As aforementioned, the Pound is enjoying the unchanged statement from the Federal Reserve. The FOMC repeated the wording that the interest rate will probably remain low for an extended period of time. Yet again, Thomas Hoeing, one of the members, voted to remove this morning. He remained the only one. So, the dollar bulls retreated again, and this is what pushes the Pound higher.

Britain is expecting two major releases. Employment figures consist of the Claimant Count Charge that disappointed with a rise last month. Another rise in the number of unemployed people is expected now. The second event is the MPC Meeting Minutes, which will show what the bankers think about future policy, especially regarding the QE program. These two events could sent the Pound back down.

Below 1.5220, the next serious line of support appears at 1.4870, followed by 1.4770, which supported the Pound when it collapsed. Above 1.5350, 1.5520 is a minor line, followed by 1.5833.

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Forex Daily Outlook – March 17th 2010

Posted: 16 Mar 2010 03:00 PM PDT


Another busy day expects forex traders: a rate decision in Japan, employment figures in Britain and Ben Bernanke for dessert are among the events today. Let’s see what’s on the menu.

The most popular pair, EUR/USD, recently enjoyed some gains, but didn’t breach significant technical levels. I see it as a rise before the fall. What do you think? Anyway, let’s start the review:

Japan provides a strong start to the day with a rate decision. The Overnight Call Rate isn’t expected to move from 0.1%. It will be interesting to see how the Monetary Policy Statement will be: the wording will shake the yen. Afterwards, the BOJ will hold a press conference, and this will also shake the yen.

At the end of the day, Japan’s BSI Manufacturing Index is expected to rise to 15.3 points.

Busy day in Britain today: the Claimant Count Change is expected to show a rise of 8,700 jobs after a disappointing rise of 23,500 jobs last time. The Unemployment Rate, which relates to the month of January, is expected to remain unchanged at 7.8%.

At the same time, the MPC Meeting Minutes will be released. They’re expected to show if any of the bankers voted to expand the Quantitative Easing program, after 200 billion pounds were used.

For the Pound’s technical levels, read the GBP/USD forecast.

In Europe, the only event due today is a speech by Axel Weber, the leading candidate to replace Trichet as the president of the ECB. For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Canada, Wholesale Sales are expected to rise by 0.6%, following a rise of 0.7% last month. The Canadian dollar holds on to its gains at the moment. For more, read the USD/CAD forecast.

In the US, producer prices will move the dollar. After a jump of 1.4%, PPI is expected to drop by 0.2% this time, indicating that no inflation is in the horizon. Also Core PPI is predicted to remain mild – a small rise of 0.1%.

One day after the rate decision, Ben Bernanke testify alongside Paul Volcker, a former head of the Federal Reserve, about the the central bank’s powers and the meaning for monetary policy. While the agenda isn’t rates, Bernanke can always shake the markets.

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