Tuesday, 15 Sep 2009

GBP Falls on King Statements; US Retail Sales on the Rise

During today's European market hours, the Bank of England (BOE) held hearings over the recent slew of inflationary data which showed CPI and RPI shrinking 0.2% less than expected. BOE Governor Mervyn King also stated during these hearings that the BOE was considering lowering its deposit rate to help increase lending. The GBP responded with a sharp drop against all of its currency rivals, falling as low as 1.6465 against the USD and 0.8866 against the EUR.

The EUR, however, wasn't expected to rise much today following the release of the German Zew Economic Sentiment report which showed consumer confidence rising less than forecast and putting a muted impact on some of the EUR's recent gains, offset somewhat by the Euro-Zone's better than expected results for this same report.

At the opening of the US markets at 12:30 GMT, producer inflation apparently rose more than forecast, signaling a return to growth in the United States. Retail sales in the US also grew substantially more than was anticipated. The initial response in the forex market was a sudden downward movement of the USD, followed by an instant correction, with the market remaining relatively flat. The Empire State Manufacturing Index also rose much more than forecast which suggests the US economy is recovering modestly.

- The indicators used are the Slow Stochastic and Relative Strength Index (RSI).

- Point 1: There is a current upward spike taking place for the USD.

- Point 2: There is, however, an impending bearish cross on the Slow Stochastic, suggesting that a downward correction is imminent.

- Point 3: The pair has apparently entered the over-bought territory, signaling downward pressure.

- Each sustained movement such as this one is often followed by a correction as the market tests each support/resistance level. Forex traders can benefit here by capturing the anticipated downward correction by entering as soon as possible.