GBP - fundamental and technical anylysis

[oildaytrader]

The british pound is linked to euro and the British economy is linked to euro /zone economies

To compare the strength of sterling , look at the euro/gbp charts.

When interest rates in the U K start rising , the Euro GBP is expected to reach 0.82 or lower to 0.70 if U K interest rates head to 4%

Interest rates 'could rise sharply in 2010'

Interest rates 'could rise sharply early next year' - Telegraph

CPI: Rate horizon lengthens as inflation falls to 1.1% | This is Money

How do we trade the eventual rise in U K interest rates?We look for a set of data confirming normalisation of U K economy , and look for a potential rise in interest rates.Follow the jobless counts,house prices, wages,inflation etc.

Forex Calendar @ Forex Factory

Bank of England

Bank of England|Home

Monetary Policy Committee
Decisions

Bank of England|Monetary Policy|Monetary Policy Decisions|2006

Bank of England|Monetary Policy|Monetary Policy Decisions|2007

Bank of England|Monetary Policy|Monetary Policy Decisions|2008

When interest rates do rise , we look at the eur /gbp charts on the daily times frames and look for weak currencies to sell against the pound.We buy the pound and sell 3 of the lowest yielding currencies at the time, basing the trade entries on daily charts.A stop loss of 300 pips is used and a take profit target of over 1000 pips is used.

Here are images of what happened when the U K interest rates rose in early 2006

When U K lowered interest rates the pound fell against all the major currencies.Google on internet to get information on dates of lowering interest rates , and do an analysis.

Bank of England lowers base rate to 5.5 per cent
Thursday 6th December 2007

British Central Bank Lowers Its Interest Rate to 1 Percent - washingtonpost.com

British Central Bank Lowers Its Interest Rate to 1 Percent

Friday, February 6, 2009

 

[TAjammy]

very good stuff!

i hear this book is good for intermarket/fundamental analysis for currencies :
Amazon.com: Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets (Wiley Trading) (9780470226230): Ashraf Laïdi: Books

so in essence we have to figure out if interest rates are to fall or to rise, when and why.

when interest rates rise, say on the GBP and they are higher than another currency then GBP will rise because foreign investors are attracted to the higher return.
monetary policy uses interest rates to stimulate aggregate demand , we want to increase demand in a recession( decrease rates) and vice versa.

hmmm...couldn't we then use a growth or recession type of indicator to analyse which countries are growing faster compared to thers, so that we can predict which currencies will be stronger against others. For example the balance of payments/trade deficit or whatever ( balance of payments is the difference between imports and exports) if we see a deteriorating balance of payments say in the USA( a sign of rapid growth ) whilst the balance of payments say in country X is increasing (sign of slow down) then shouldnt the USA gov. increase interest rates to stablise growth, whilst country X's gov could cut interest rates to stimulate it's economy then the currencies could also change, if you imagine the currency pair X:USD, X's countries interest rates are low, 1%, USA has 2.5% then shouldn't we assume that big pension fund-like investors would go for the more attractive investment into the USA, increasing demand of the USD and pushing it's value up.


heh
just a thought

 

[oildaytrader]

Keep it simple and keep looking at the daily charts.

If Japan has surplus cash from exports,and interest rates are low in Japan, it will invest its money abroad where interest rates are high.

In theory there should be more demand for yen to pay for the imports of other countries, in practise years of savings in the economy leave Japan.

Currency movements have more to do with yields on long bonds/treasuries etc

 

[TAjammy]

yeh you're right.

heh i know nothing about fundamentals to be honest but i'm getting a book soon which could help me get up to scratch, i've got to grasp with technical analysis as far as i know....


technical analysis wise, EUR/GBP looks bullish, higher highs, and higher lows, but it has recently just about made a lower low, but this came of a higher high, the MA's are diverging and price is well above them, i went long on this pullback with a H4 entry but that's not important.

Any words on the fundamental side of this pair?

 

[oildaytrader]

Hi guys

some good reports here

http://www.scotiafx.com/Chart_Feed/fxout.pdf

 

[TAjammy]

pffft took a 90 point hit on eur/gbp.

treasury bonds, interest rates, gold and some other commodities have a huge effect on currencies, apparently.

right, here's my TA on GBP/USD.

lower highs and lower lows, although most recent low was off a major support level so the bounce could go further

but nevertheless we have a downward range, mabye it';; break out to the upside? or maybe it'll continue downward, im pretty sure fundamental analysis could clear this up

+ price as of now is resting at a fibonacci cluster level of 50% and 61.8% from the past two swing highs, some people dont like fibos but i use them a lot for TA, 50 is the only one i use to be honest but i will pay attention to any % as long as it's in a cluster.

by the way whenever i say that there's no real trend i'm concering the longer term picture, sure, in that picture the trend is down but the intermediate trend is sideways, we aren't fighting any price trend, but by going short we'd be following the short term trend.

 

[TAjammy]

mmm i thought we were just sharing our thoughts , some showing the TA analysis and some showing fundamentals, some showing both. whatever though, anyone just post your analysis

 

[oildaytrader]

When interest rates rise the currency becomes stronger, if interest rates fall or stop rising the currency becomes weaker.

See case study on AUD Australian dollar

http://www.trade2win.com/boards/forex-discussion/76330-audjpy-ready-pop.html

http://www.trade2win.com/boards/forex-news-analysis/74620-audusd.html

The purpose of this thread is to monitor all economic reports and form an opinion of when interest rates are likely to rise ,fall or go on hold.Once those decisions are confirmed ,monitor the charts and post the anylysis.

Interest Rates
Importance to Forex

Lesson 5 Central Banks and Interest Rates - Interest Rates Importance to Forex - CMS Forex

 

[oildaytrader]

Hey Guys

Today was a good opportunity to short cable on dissapointing gdp data.We need to make advance preparations of expected news and post in advance the likely outcome of material deviation.When are guys taking over this thread , so we can all have quality input?Some of you were asking for a thread like this , yet none of you are contributing.

U.K. Economy Unexpectedly Shrinks in Longest Slump (Update2) - Bloomberg.com

 

[oildaytrader]

http://www.forbes.com/feeds/ap/2009/11/11/business-eu-britain-unemployment_7109868.html

Looks good for swinging short term.U K is not out of the woods yet

 

[oildaytrader]

Euro has been over sold against the crosses .Cable has benefited ,despite poor retail sales and a fall in house prices.

Expecting a recovery in Euro/gbp with a short term target of 0.91

http://news.bbc.co.uk/1/hi/business/8417860.stm

http://www.forextv.com/Forex/News/ShowStory.jsp?seq=1155427&category=Economic+News

 

[montmorencyt2w]

Euro has been over sold against the crosses .Cable has benefited ,despite poor retail sales and a fall in house prices.

Expecting a recovery in Euro/gbp with a short term target of 0.91

http://news.bbc.co.uk/1/hi/business/8417860.stm

http://www.forextv.com/Forex/News/ShowStory.jsp?seq=1155427&category=Economic+News

Sorry, I hadn't noticed this thread before, but this approach is of interest to me.
What do you make of the apparently conflicting reports on house price moves?

On interest rates, a report the other day (sorry don't have a reference) said there was a danger of 3% inflation not too far away because of increased fuel costs. This would presumably lead to at least talk about interest rate rises, which could be positive for the GBP.


Someone else mentioned Ashraf Laidi whom I also follow. Interesting mix of fundamentals and technicals, and correlation (sort of). He's fairly bearish on EUR/USD right now. Not so clear on EUR/GBP I don't think.

 

[oildaytrader]

Sorry, I hadn't noticed this thread before, but this approach is of interest to me.
What do you make of the apparently conflicting reports on house price moves?

On interest rates, a report the other day (sorry don't have a reference) said there was a danger of 3% inflation not too far away because of increased fuel costs. This would presumably lead to at least talk about interest rate rises, which could be positive for the GBP.


Someone else mentioned Ashraf Laidi whom I also follow. Interesting mix of fundamentals and technicals, and correlation (sort of). He's fairly bearish on EUR/USD right now. Not so clear on EUR/GBP I don't think.

Rightmove's price are inflated , they are asking prices .The move higher is probably over.

I think euro usd is just about fair value , cable could see more weakness over next few months.The unemployment fell last week.

O D T

 

[oildaytrader]

Here is euro gbp showing attempts at recovery from oversold

 

[oildaytrader]

Here is the euro gbp come out of a fundamentally oversold position