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FX Day Trading - 25 August 2011
Investors gang up on sterling
But it could just have been a big mistake
Market nervous ahead of Bernanke speech tomorrow
Former home secretary Jacqui Smith used two prisoners on day-release to paint her house prior to renting it out. They were unable to finish the job. Political opponents accuse her of attempting a whitewash.
Sterling nearly got away with one yesterday. It very probably would have done had it not been for an unexpectedly strong showing by US durable goods orders.
At lunchtime the pound was on the defensive after drifting lower through the morning. It was under no undue pressure and looked as though it might rebound from a support/resistance level on the Cable chart*.
At half past one the US durable goods orders data showed a 4.0% monthly increase, double what had been forecast. Excluding transportation items, orders were up by 0.7% instead of falling by the predicted 0.5%.
Nine times out of ten the figures would have been dismissed as yet another fluke in the long history of durable goods unpredictability.
This time though, financial spread betting investors decided to use them as a stick to poke the pound. Cable fell below the technical support and carried on to lose another cent.
The euro also reacted negatively to the news, but not by much and not for long. The yen did not budge at the time.
Sterling's decline was exacerbated by a dollar rally during the afternoon, which might or might not have been a late reaction to the positive durable goods orders figure. It is equally possible that it could have been one of those occasions when the dollar went up simply because people were buying it, and they were buying it because it was going up.
No, don't snigger, it does happen from time to time. With Federal Reserve Chairman Ben Bernanke due to give a speech at the Jackson Hole symposium tomorrow, indices spread betting investors are becoming increasingly jumpy about whether or not he will announce a fresh round of quantitative easing, as he did on the same occasion a year ago.
That jumpiness is enough to send them off in pursuit of will o' the wisps, irrespective of the data.
Not that there will be any data of major consequence today. Nationwide's index of UK consumer confidence is already out, down by two points at 49 but better than the forecast 46. Gfk's index of German consumer confidence was in line with expectations at 5.2, microscopically lower on the month.
Swiss employment will not matter, nor will ZEW's survey of business expectations. The CBI's UK retail sales survey is forecast to show a further fall from -5% to -10%; a bad result could weigh on the pound. That just leaves the weekly US jobless numbers after lunch.
A nervous market might seize on all or none of those figures as an excuse to do something, but do not read too much into what might be no more than random reactions.
*In the black art of technical analysis a support level is one from which a price is expected to rebound. If the price falls through it, that same level can often become a resistance to renewed upward travel. "Cable" is how the FX market refers to the GBP/USD exchange rate.
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The above content does not constitute investment advice, it is provided purely for information purposes and is delivered as a personal view of the writer. Neither the contributing company (or writer) nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the content.
'Financial Spread Betting: Cable Falls on Positive US Durable Goods Orders', Article by Moneycorp, last update: 25-Aug-11
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