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Thread: How Strong Is The GBP Really?

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    In Profit AmroDiab's Avatar
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    Default How Strong Is The GBP Really?

    The recent moves from the GBP have grabbed Traders attention as it climbed to multi-decade highs against the US$. An economy that has posted good growth numbers this year with the Inflation rate above the Bank of Englands target has been attributed as helping the rise higher, with Traders looking for the currency to increase in value as overnight interest rates went up in an effort to tame inflationary pressures.

    Traders got what they wanted this week with a rate increase to 5.75%, pushing LIBOR and mortgage rates higher. As the Pair pushed to $2.0200 the Speculative interest subsided dramatically, leaving the Institutions to hold these price levels if they so wished. The Rate Hike Hype has gone; rates are up and are now built into the current value of the currency.

    In April the same thing happened when the currency was pushed to the $2.0150 area, and in subsequent trading sessions went on to retrace the moves back to $1.9700. At that time the US had not shown the Manufacture and Service sector strength that has recently been seen, the GBP weakened because of internal economics and sentiment, rather than on $ strength at that time.

    Many analysts have extolled the virtues of the Cable trading at these levels, others however have questioned the valuations, there is no right or wrong; the Pair is at these levels because of speculation and supply & demand. The bigger issue is whether it can now hold up here.

    The CPI, Consumer Price Index, has dropped over the last three reads, it is still above the Banks target but is coming down each month. This gauge of inflation is showing us that recent rate increases may well be having the desired effect of reducing inflationary pressures, Retail numbers are lower, Confidence numbers are down, Hotel and Restaurant Output is lower, New Car Sales are down; these are the first areas that normally show a decrease when looking for an economic slow-down.

    Add to that an increase in next months mortgage payment for UK homeowners who are already paying the highest rates to buy a home anywhere in the world, and the UK may then have a consumer lead reduction in inflation. Just what the Bank would like to see, how will Traders react though?

    On Friday the US$ could not hold gains made against Major Pairs after the Non Farm Payrolls, the $ started to weaken half way through the US session. However, as the Aussie, Cad, Euro and Swissy gained the GBP went sideways. The currency was a drag on its counterparts as they tried to test $ weakness, like a stubborn mule it sat down and refused to move in-line with the other Pairs. This was a signal that the speculators had moved on from Cable, they looked to be in Cad as it made big moves against the $, and nobody seemed to want to buy the GBP/USD.

    Secondary confirmation of GBP strength or weakness has been shown in another Pair this week. EUR/GBP has shown the GBP going lower against the Euro all week, with some big moves for a Pair that normally does not go too far, too fast. This could be a signal that the GBP may not now have the Institutional support that many thought was built in, if the US$ can produce some strong economic numbers the Pound may come under more selling pressure than most

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    From my analysis I'd say GBP is just about ready to top off and begin it's long decline for the next 10 yrs or so. The USD has been quite weak for a long time now and theres a need for some change

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    Yes correct, this week it will go down bexause now it 's already at the high prodition. Jus wait and practise


    ic

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    Yep the best part is being able to go short 100% knowing there'll be like no chance of going up

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    GBP/USD: I’m looking for this pair to move faster down the hill than the euro, and that is because of the cross being in a strong UP. Therfore in the euro, I’d almost have to favor that latter scenario unfolding, while on Monday cable should back up to 2.0127, then the fun for the week should begin on the downside. I would look another battle in the 2.0067 support region. Once broken, then the next area to look out for would be 2.0036. Once price gets comfortably around that, then it will be back in the 1.99’s in no time. As long as this is a correction only, then I would look for rock solid support at 1.9914.

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    but now the gu still strikes... and topped at 2.0163..
    what the hell happened with gu...
    still grew stronger...?

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    Quote Originally Posted by FXManiac View Post
    From my analysis I'd say GBP is just about ready to top off and begin it's long decline for the next 10 yrs or so. The USD has been quite weak for a long time now and theres a need for some change
    Probably it is, but as a rule: we follow the market, not the market has to follow us. Major decline lasting for 10 years or so is not a small thing, there has to be a major news/event to change its momentum. Event when such trigger occurs, I don't expect the change of direction will occur immediately.

    Well it's only my opinion, the market has its own

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    definitely! Like I was saying on another post somewhere here that the actual reversal should take place later this year probably in September/October but till then it will stay up and around 2

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    what make u think that fx?

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    Quote Originally Posted by FXManiac View Post
    definitely! Like I was saying on another post somewhere here that the actual reversal should take place later this year probably in September/October but till then it will stay up and around 2
    Hmm. Are you expecting some major event around September/October 2007? Aside any unexpected news, big event that I expect could change the course of GU is USA presidential election. And it's still another year.

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