Watch this Forex Mastery 2.0 Video that shows 21st Century Forex Technology-Two powerful indicators that can take your forex trading to the highest possible levels. Download this 1 Minute Forex Trading System FREE. Get this powerful Forex Swing Trading End of Day Trading Kit (100 page PDF plus Videos) FREE! John Chen: I like to trade GBP/USD (nickname: The Cable) because of its volatility and trendiness… as well as the USD/JPY pair. And as you know, I like to deliver massive value to my newsletter readers. That’s why I decided to share my GBP/USD and USD/JPY fundamental and technical reports for this week. Enjoy!
Sterling Fundamental Picture:
Last Week’s Recap:
Cable continued to trade in a more volatile way than usual, as the increasing likelihood of a hung parliament in the upcoming General Parliamentary Election on May 6th weighs on the Pound. The pair initially traded off of its weekly high of 1.5496 made on Monday as increased election concerns weakened Sterling. The pair continued losing steam on Tuesday as U.K. BBA Mortgage Approvals came out at a disappointing 34.9K versus a 39.3K consensus, with the previous number revised downward from 35.3K to 33.4K. Also on Tuesday, U.K. CBI Realized Sales came out at a poor 13 versus an expected 16 consensus.
Cable then made its weekly low as opinion polls in the U.K. made both the major Tory and Labour parties cringe as the Liberal Democrat party showed a lead for the first time in 104 years. The rate then recovered on Thursday, as U.K. Nationwide HPI showed an impressive 1.0% improvement versus a consensus of a 0.4% increase, with the previous number revised upward from 0.7% to 1.0%. Nevertheless, GfK Consumer Confidence showed a drop of -16 versus the expected fall of -14. Cable then resumed its decline on Friday, closing the week at 1.5264, down 0.7% versus the previous weekly close.
Next Week’s Outlook:
The coming economic data week in the U.K. begins with a Bank Holiday on Monday and features the U.K. General Election on Thursday. Tuesday has the important Halifax HPI (0.6% M/M), Manufacturing PMI (57.5), Net Lending to Individuals (2.0B M/M) and Final Mortgage Approvals (50K). On Wednesday, look for Nationwide Consumer Confidence (80), the BRC Shop Price Index (1.2% Y/Y) and Construction PMI (53.5).
Thursday will be the undisputed weekly highlight, offering Services PMI (57.1) and the U.K.’s Parliamentary General Election which may make trading in Cable very volatile, especially if the outcome indicates a hung parliament where no party has a sufficient majority in Parliament. In this case, an as-yet untested Labour/Liberal Democrat alliance may end up taking power. Friday closes the week with PPI Input (1.0% M/M) and Output (0.6% M/M).
Sterling Technical Picture:
GBP/USD continued its down trend last week, trading as low as 1.5125 after now seemingly completing the final C-wave of a larger fourth wave correction at 1.5521. The rate’s 14-day RSI has thus far been confirming the downward move and currently sits in neutral territory at 51. Resistance to the topside for GBP/USD shows at 1.5337, 1.5484/97 and 1.5521, while support is indicated at 1.5127/41, at the key psychological 1.5000 level and in the 1.4782/97 region. Overall, the medium-term outlook for GBP/USD remains bearish while the rate trades below its 200-day Moving Average that is sloping firmly downwards and now comes in at 1.6019. Also, the Dec 29 2009 low seen at 1.5865 should now cap the upside for the bearish medium-term outlook to prevail for Cable.
On a short-term basis, GBP/USD could again see some impressive downside activity during the coming week that might even see the rate accelerate further on a confirmed break below the key 61.8% Fibonacci retracement level of the upward move from 1.3502 to 1.7041 at 1.4854 to make some significant progress toward testing its March 1st low at 1.4782. If that latter key level gives way on a confirmed break, GBP/USD should then accelerate in a Fifth Wave movement toward meeting the 1:1 Fibonacci projection target of the First Wave move from 1.6876 to 1.5832 projected off of the 1.5521 Fourth Wave high at 1.4477. Corrective rallies should now represent selling opportunities for GBP/USD, provided that 1.5865 continues to cap the upside.