Today Cable went up very strong as the Nationwide HPI report got quite a lot deviation. The initial reaction was a strong spike but the price formed a consolidation pattern at daily resistance (62% retr. from the previous leg down). After the consolidation (123 figure) we got a good opportunity to go short, stop above the previous swing high, targeting the 100% retracement (very tipical when the price retraces after the news…)

GBP/USD

Cable finally has broke higher. The break of 1.6665 has taken this to the next level of 1.6720. Here this should halt a little before continuing its upward journey.

However pullbacks currently look limited to 1.6665 and buyers will be waiting in the wings for this level so they can re-enter the market. If however the sellers decide further downward moves look likely they will bust through this support, leaving 1.6621/00 then exposed. However buyers will once more be waiting at these lower levels and this support is expected to hold.

If above 1.6720 then buyers will take the reins and the will drive this higher to our weekly level of 1.6830. This is important resistance and unlikely to break first attempt. Buyers will thus take profits ahead of this resistance and sellers will abound to cap. Only above 1.6850 would you see sellers jump ship and then 1.6910 will entice.

Source: FXstreet and Charmer Charts.com

PBOC governor Zhou Xiaochuan told reporters in Basel on Sunday that China’s “foreign exchange reserve policy is always quite stable,” and noted that China’s reserve policy is aimed at “liquidity, safety and returns.” The news helped to boost the dollar at the start of trade this week, with EUR/USD falling through the 1.4000 level as traders breathed a sigh of relief regarding the greenback’s ongoing status as a reserve currency.

On Friday the buck came under pressure after China hinted at a need for new architecture in the foreign exchange market. The PBOC stated that, “To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers.” However, today tacit reaffirmation of the dollar standard is a sign of Chinese acknowledgement that for the time being the greenback remains the primary manner for settling global trade accounts.

Source: Fx360.com

Today we had a very tricky session at the Frankfurt - London window, as the price in GBP /USD retraced almost all the way down the previous leg up, so if you didn’t entry at the very beggining of the trendline broken, you were stoped out. Let’s review the trade:

- Price reaches the Asian support and gets rejected

- Price breaks the descending trendline. (entry opportinity). Stop below the previous swing.

- Partial profit taking at Asian resistance level. Let the rest run.

- Very tricky, price pulls back very strongly

Today we’ve got a very clear pattern that it repeats very often at the european opening. Let’s review the trade in GBP /USD:

The price breaks the assian support just after the Frankfurt opening.

If you missed the breakout you had another 3 opportunities to go short. Stop above the previous swing high.

See the charts for more explanations.

Today we got a very clear pattern that happens very often at the European opening. The price was playing through the boundaries of the Asian channel and finally broke the Asian resistance. Let’s review the trade (GBP/USD):

1. Price makes a 123 figure at the Frankfurt opening.

2. Price breaks the descending trendline (first entry opportunity)

3.  Price breaks the Asian resistance (second entry opportunity)

4. Price retraces after the breakout and “rests” on the EMAS (third entry opportunity)

5. Stop below the previous swing low

6. Partial profit taking and targeting the 60 m. resistance and round number 1.6500 for the runner

The latest consumer confidence data from Europe suggests a marked improvement in sentiment. Yesterday, German GFK survey rose to 2.9 from 2.5 forecast reaching a 12 month high, while today the Italian confidence data hit 105.4 vs. 104.7 projected, its best reading since 2007. Bur does this new wave of optimism portend a pick in economic activity and an increase in consumer spending in the second half of 2009? Has economic recovery finally reached Europe?

We don’t think so. The latest European data on consumer spending data continues to suggest a big disconnect between sentiment and action. For example while today’s Italian sentiment data improved, the actual report of Italian retail sales showed a decline of -0.4% vs. 0.0% forecast. More troubling still has been the continued decline in purchases of big ticket items. New car registrations dipped for 13th consecutive month in May and even those figures have been propped up substantially by government incentive programs to trade in old cars.

Source: Fx360.com

Today we had a nice opportunity in Cable, Breaking the main ascending trendline and falling all the way down accelerated by the worst than expected Retail Sales report.

I don’t have time today to make a better report as I’m quite busy these days because of the Madrid Seminar.

I hope you took some piece of the rally !!

Over the past few weeks, there has been a lot of speculation that the BRIC nations could officially call for diversification out of dollars or at least agree to buy each other’s bonds, but the final statement steered clear of any direct threats to the dollar. In fact the statement was very lame and even puts Russia’s credibility in question since their 2 goals of undermining the dollar and pushing for a supranational reserve currency have failed to get the support of China, India and Brazil. As the primary economic power of the four nations, China most likely pressured Russia to a keep a lid on their campaign to reduce the global role of the dollar because everyone has more to lose than gain from further dollar weakness at this time. As a compromise, they only made an indirect comment about reserves by calling for emerging economies to have a “more diversified” global monetary system. They also agreed to push for a “greater voice and representation in international financial institutions.” The influence of the BRIC nations will continue to grow in the coming years and as we have seen over the past few months, their decisions or actions are having a greater impact on the financial markets. The threat of reserve diversification could go into hibernation but once the global economy starts to recover, it could return with force.

Source: Fx360.com