Sterling Under Pressure -- Have They Spotted The Elephant At Last?

[Realistbear]

http://uk.finance.yahoo.com/news/Pound-hits-2011-low-against-reuters_molt-206204908.html?x=0

Pound hits 2011 low against euro

Niki O'Callaghan, 14:43, Friday 25 March 2011

LONDON (Reuters) - Sterling hovered close to 2011 lows versus the euro on Friday and was poised for further losses on concerns over UK economic growth and uncertainty over the timing of a Bank of England rate hike.

The single European currency narrowly extended its 1 percent rise on Thursday when weaker-than-expected UK consumer spending data raised concerns over growth which could further push back the timing of an interest rate rise from the Bank of England.

"The pound is under pressure. Weak retail figures, a somewhat dovish tone from the MPC (KOSDAQ: 050540.KQ - news) minutes on Wednesday as well as George Osborne cutting the UK growth outlook and rate hike expectations being pushed back, are putting sterling on the backfoot," said Geraldine Concagh, economist at AIB Treasury Group.

UK finance minister George Osborne downgraded the government's projections for UK growth to 1.7 percent for this year in his budget statement on Wednesday, while Thursday's weaker retail sales data was a reminder that the UK consumer is being hit by a fiscal squeeze and rising inflation.

Money markets are now pricing in the first rate hike in the UK for August. On Tuesday, after inflation jumped to its highest in two-and-a-half years, they had expected the first hike in July.

"Trichet and others have made it clear that they will hike rates as intended despite news events around the world. The discrepancy between the BoE and ECB is pulling euro/sterling higher. There is a good possibility that the pair can go as high as 90 pence," said Beat Siegenthaler, currency strategist at UBS (NYSEArca: DJCI - news) .

The euro was helped on Friday after German business sentiment fell less than expected in February, though concerns over the Portuguese economy undermined the currency.

The single currency rose to 88.12 pence, its highest since November (Berlin: NBXB.BE - news) 4. It later eased to 87.85, close to unchanged on the day.

Technical analysts said the outlook for the euro remained positive after a break above key trendline resistance at 87.60, drawn from the all-time highs around 98.05. Analysts at CMC (BSE: CMC.BO - news) markets said a close above the trendline would open the way for further euro gains.

Sterling extended its retreat from a 14-month high against a broadly firmer U.S. dollar, trading down around 0.4 percent at $1.6052.

"Cable will possibly push a little lower over the next few days, but 1.5960 is seen as a solid support level. It was tried in February and March but cable continues to hold above," said Daragh Maher, head of global foreign exchange at Credit Agricole CIB

.

What decided 1.5960 as a "support level?" FOREX is a frenzied exchnage dealing with vast sums every millisecond. Complex computer programs kick in and out on every pattern as fundies move cash on fundamentals. Support levels are just confluence of frenzied shorts and longs randomly driving the market too and fro.

The best anyone can do is to look at the broad fundmentals and the elephant in the corner of our room (the £5.1 TR one).

The "support" level of 1.5960 came beore the OBR's downgrade of economic growth and a few more months' house price drops together with worsening employment. Ingredients for a breakthrough previous support levels--the fundies vs. the stochasticals.

If I had to call it I would say 1.55 is a more natural exchange rate with the $ until we get a full on admitted HPC.

Edited March 25, 2011 by Realistbear

[plummet expert]

http://uk.finance.yahoo.com/news/Pound-hits-2011-low-against-reuters_molt-206204908.html?x=0

Pound hits 2011 low against euro

Niki O'Callaghan, 14:43, Friday 25 March 2011

LONDON (Reuters) - Sterling hovered close to 2011 lows versus the euro on Friday and was poised for further losses on concerns over UK economic growth and uncertainty over the timing of a Bank of England rate hike.

The single European currency narrowly extended its 1 percent rise on Thursday when weaker-than-expected UK consumer spending data raised concerns over growth which could further push back the timing of an interest rate rise from the Bank of England.

"The pound is under pressure. Weak retail figures, a somewhat dovish tone from the MPC (KOSDAQ: 050540.KQ - news) minutes on Wednesday as well as George Osborne cutting the UK growth outlook and rate hike expectations being pushed back, are putting sterling on the backfoot," said Geraldine Concagh, economist at AIB Treasury Group.

UK finance minister George Osborne downgraded the government's projections for UK growth to 1.7 percent for this year in his budget statement on Wednesday, while Thursday's weaker retail sales data was a reminder that the UK consumer is being hit by a fiscal squeeze and rising inflation.

Money markets are now pricing in the first rate hike in the UK for August. On Tuesday, after inflation jumped to its highest in two-and-a-half years, they had expected the first hike in July.

"Trichet and others have made it clear that they will hike rates as intended despite news events around the world. The discrepancy between the BoE and ECB is pulling euro/sterling higher. There is a good possibility that the pair can go as high as 90 pence," said Beat Siegenthaler, currency strategist at UBS (NYSEArca: DJCI - news) .

The euro was helped on Friday after German business sentiment fell less than expected in February, though concerns over the Portuguese economy undermined the currency.

The single currency rose to 88.12 pence, its highest since November (Berlin: NBXB.BE - news) 4. It later eased to 87.85, close to unchanged on the day.

Technical analysts said the outlook for the euro remained positive after a break above key trendline resistance at 87.60, drawn from the all-time highs around 98.05. Analysts at CMC (BSE: CMC.BO - news) markets said a close above the trendline would open the way for further euro gains.

Sterling extended its retreat from a 14-month high against a broadly firmer U.S. dollar, trading down around 0.4 percent at $1.6052.

"Cable will possibly push a little lower over the next few days, but 1.5960 is seen as a solid support level. It was tried in February and March but cable continues to hold above," said Daragh Maher, head of global foreign exchange at Credit Agricole CIB

.

What decided 1.5960 as a "support level?" FOREX is a frenzied exchnage dealing with vast sums every millisecond. Complex computer programs kick in and out on every pattern as fundies move cash on fundamentals. Support levels are just confluence of frenzied shorts and longs randomly driving the market too and fro.

The best anyone can do is to look at the broad fundmentals and the elephant in the corner of our room (the £5.1 TR one).

The "support" level of 1.5960 came beore the OBR's downgrade of economic growth and a few more months' house price drops together with worsening employment. Ingredients for a breakthrough previous support levels--the fundies vs. the stochasticals.

If I had to call it I would say 1.55 is a more natural exchange rate with the $ until we get a full on admitted HPC.

Growth will be weaker than Osborne says. We will see this through the year and then, the debt mountain will look like.......well a debt mountain which cannot be paid back as IR's rise. I know many say sterling is stronger because coalition policies are in place/deficit control is here. But it actually isn't. Cuts would have to be far more savage to actually stop the national debt growing beyond help. Ireland will one day show us that their savage cuts were not pointless but the only course open to stop the rot. You cannot cut out gangreen at the ankle, you usually need to cut above the knee. Much more painful thought, but at least the patient lives.

[Realistbear]

Have you considered this inflationary pressure is mainly from imports therefore this effect could wean the UK consumer off imports which inturn could drive growth locally encouraging the increase in money velocity within the UK which is beneficial to the Govt?

If the UK could follow Germany and become a quality manufacturing based country we have some real hope. Got torid ourselves of the parasites first: starting with the banksters.

Merv certainly thinks inflation is being imported and that due, no doubt, to the temproy effects of QE and the fact that the EZ have yet to reign in their spending.

[Democorruptcy]

Don't worry if one of the main currencies moves a little out of kilter, those nice central banking chappies all club together now to smooth things out.

[pilchardthecat]

"Technical analysts said the outlook for the euro remained positive...."

I'd be most grateful if a technical analyst could pop in and explain this positivity. Thanks in advance.

[Democorruptcy]

The single biggest cost to the country is the benefits bill and this could easily be cut but it would create the biggest uproar due to the sheer number of people tapping it in this country.

The country can only improve its finances if its population chooses to (by virtue of thinking twice whether they need to have that Govt handout), the Govt is merely the patchwork rudder man.

Never mind a few benefits, somebody told me the gubbermint were buying people houses now as well.

You seem to be implying people should think about living within their own means. It clearly isn't what the gubbermint wants. They are so benevolent with their money, it is almost untrue. They just shower people with it.

[Guest_FaFa!_*]

"Technical analysts said the outlook for the euro remained positive...."

I'd be most grateful if a technical analyst could pop in and explain this positivity. Thanks in advance.

I'm an amateur and not familiar with EURGBP charts, but to me it looks overbought. Looking at the daily GBPEUR chart (which I again don't know well) I believe we actually took out 2011 lows (daft measure, we are 3 months into the year so the current year's low is nothing to get excited about in my opinion) over a week ago.

A positive spin in the mainstream media would probably indicate a short term top. The big boys offer load their positions onto the mugs. It is coming to the end of the quarter, so I'd imagine they'd be looking to book profits too.

[caparn]

Yes, it's the same elephant that's been in the MPC meetings.

[Democorruptcy]

Yes, it's the same elephant that's been in the MPC meetings.

Couldn't resist adding to my Merv collection

[Left the UK 2009]

1.596 is a rock solid support level, tested numerous times over the past couple of months. It is a support level for no more reason than lots of traders are buying at that level. I am looking for a bounce to around 1.617 where there are a lot of potential resistance points converging, moving averages, fibonaccis and a nice trend line going back to August 2009. Failure to break above 1.617 and we could see 1.58 next week. I am pretty certain that we have seen the dollar low for the year.

[The Masked Tulip]

Have you considered this inflationary pressure is mainly from imports therefore this effect could wean the UK consumer off imports which inturn could drive growth locally encouraging the increase in money velocity within the UK which is beneficial to the Govt?

I hear what you are saying, see where you are going but I can't go along with you.

The UK populance has become a nation of addicts - addicted to junk food, addicted to junk TV an addicted to junk tat from overseas.

[Realistbear]

http://uk.finance.yahoo.com/news/U-S-bumps-fourth-quarter-reuters_molt-107001792.html?x=0

U.S. bumps up fourth-quarter

growth to 3.1 percent

Lucia Mutikani, 17:28, Friday 25 March 2011

WASHINGTON (Reuters) - The U.S. economy grew more quickly than previously thought in the fourth quarter, the government said Friday, but signs of softer consumer and business spending may slow its momentum in early 2011.

With the US in recovery mode and we in shrinking mode it makes sense to see a bit of adustment in CABLE.

Sailing near the 1.60 break down point this evening:

GBP/USD(CCY: GBPUSD=X )

Last Trade: 1.6021

[Realistbear]

1 GBP $1.59651 Euro 1.13687

Elephant spotted. Perhaps reality is now setting in? Posen may have been the trigger.

Q: how far will £ have to fall to reflect what lies ahead in the next 24 months or so?

[Realistbear]

Sterling holding, just, above the 1.5960 break down point.

Euro going down too:

http://uk.finance.yahoo.com/news/Euro-slips-German-election-reuters_molt-3293314366.html;_ylt=AjUuHDm1GVofpAqMPFHrGizSr7FG;_ylu=X3oDMTE4OWw1dGJyBHBvcwM3BHNlYwN5ZmlUb3BTdG9yaWVzBHNsawNldXJvc2xpcHNhZnQ-?x=0

GERMAN ELECTION HURTS EURO

Merkel's Christian Democrats lost power on Sunday

in the rich state of Baden-Wuerttemberg, where a rush of anti-nuclear sentiment following Japan's nuclear crisis mobilised voters against the party, which has been supportive of nuclear power.

The loss of the regional stronghold could limit Merkel's ability to pass legislation as her coalition centre-right government deals with nuclear power, military action in Libya and the euro zone debt crisis.

While erosion of Merkel's clout at home weighed on the euro, prospects of a European Central Bank rate was an important element holding up the single currency, Gibbs said.

[Left the UK 2009]

Bosh! Down she goes. There should be a retest of 1.6 but I am looking for 1.575 for this week and down to 1.42 for this year. Some bad news tomorrow morning for the British current account would add to the downward pressure. Anyone in favour of making this the general thread for GBP discussion?

[Realistbear]

Bosh! Down she goes. There should be a retest of 1.6 but I am looking for 1.575 for this week and down to 1.42 for this year. Some bad news tomorrow morning for the British current account would add to the downward pressure. Anyone in favour of making this the general thread for GBP discussion?

It is a big issue for sure.

Bouncing back from the supposed psychologically important 1.5960 break down point.

Computer buy-trades kicking in below 1.5975. Posen's statement might not have filtered through to the traders yet?

Edited March 28, 2011 by Realistbear

[Bloo Loo]

Bosh! Down she goes. There should be a retest of 1.6 but I am looking for 1.575 for this week and down to 1.42 for this year. Some bad news tomorrow morning for the British current account would add to the downward pressure. Anyone in favour of making this the general thread for GBP discussion?

short-termism in the city....here, in this post, we see the proof.

speculators cae not about economies except their state now and the next few minutes...yesterday was ancient history, this afternoon is a new genesis.

This is why the market can stay irrational longer than you can stay solvent....speculators buying and selling all day and everyday, and when they cant they buy futures, hedges derivatives.

This is not business. This is Speculation.

[fluffy666]

"Technical analysts said the outlook for the euro remained positive...."

I'd be most grateful if a technical analyst could pop in and explain this positivity. Thanks in advance.

Technical analysts can explain absolutely everything. Including charts generated completely at random.

[Realistbear]

Technical analysts can explain absolutely everything. Including charts generated completely at random.

Agree. I prefer Buffet's approach: The Pendulum.

[Left the UK 2009]

short-termism in the city....here, in this post, we see the proof.

speculators cae not about economies except their state now and the next few minutes...yesterday was ancient history, this afternoon is a new genesis.

This is why the market can stay irrational longer than you can stay solvent....speculators buying and selling all day and everyday, and when they cant they buy futures, hedges derivatives.

This is not business. This is Speculation.

That`s right. I am no city boy but I do speculate, at the moment against the pound.

I never understand why technical analysis gets so much stick. Anyone who knows how to do it knows how enormously powerful it is.

[Timak]

On the nearest trading day to January 1st £1=$1.60 to within a cent or two in 1980, 1990, 2000 and 2010. 30 years of fairly consistent exchange rates with a bit of fluctuation either way but always returning to this level.

I open threads like this started by RB every few weeks expecting to see £1=$1.20 or something like that and, so far, every time £1=$1.60 to within a few cents.

[fluffy666]

Agree. I prefer Buffet's approach: The Pendulum.

I thought Buffet's approach was, 'Get lucky, have people declare you to be a genius, then simply do whatever trade you feel like and let everyone know you are doing it'.

After all, if Buffet buys shares in company A, and then announces to the world that he has just bought shares in company A, what are the odds of his making money on that investment?

[Bloo Loo]

That`s right. I am no city boy but I do speculate, at the moment against the pound.

I never understand why technical analysis gets so much stick. Anyone who knows how to do it knows how enormously powerful it is.

Anthony Boulton used it as a tool too...not the only one...he searched for value too.

[Democorruptcy]

It's looking like Nadeem might have done his money.

Think his stop loss was 1.52

[fluffy666]

That`s right. I am no city boy but I do speculate, at the moment against the pound.

I never understand why technical analysis gets so much stick. Anyone who knows how to do it knows how enormously powerful it is.

It's roughly equivalent to Astrology as far as being based in reality goes. There is a massive amount of post-hoc rationalization involved; at best it's a way of rationalizing your own hunches (which may themselves be valid if you spend a lot of time looking at the markets).

As I said, TAs will find their channels, support levels, head and shoulders and whatnot in random data. This should tell you about how powerful the technique is.