Forex trading involves analysis at the macroeconomic level. Here we explain a new tool that can be used to help you accurately predict the direction of the US Dollar against other world currencies. Knowing the direction of the dollar will assist you in trading with the trend (before a trend is showing to other traders).
Our Forex analysts have been watching the short money flow into dollar futures slowly dwindle down over the past month. We are now in a technical area on The Deutsche Bank US Dollar-Short Futures Index ($USDDNX.X) that puts us into a bullish position on the USD/GBP pair.
- Price has crossed above 20 day moving average.
- MACD is showing a positive long signal.
- Price broke above first level of resistance of 150.10.
The last time money flowed into short positions on the USD futures, we saw a corresponding 1000 pip push up in the GBP/USD from 1.94 to 2.04 between Feb 20 and Mar 13, 2008.
We might see some consolidation around these levels on the short futures before an attempt at the second level of resistance at 151.50. A break above that level will leave the final resistance at the all time high of 153.30.
Also keep an eye on the GBP/USD forex chart. The daily chart put in a hammer reversal on May 14, 2008. Any long position should have a stop set just below the low on that day of 1.9361.
Our analyst further caution that with the current technical indicators on the GBP/USD chart, any move up is merely a corrective retracement unless 2.04 is broken to the upside, which would indicate a medium term bullish trend change.
Fundamentally the Bank of England announced it anticipates “No” rate cuts over the next two years as reported on Financial Times. The BOE stated that the US Federal Reserve Bank is known for ambiguity and vagueness.
This leaves the GBP paying 5.0% compared to 2% for the US Federal Reserve. The Forex markets had generally been pricing in an anticipated one or two rate cuts by the BOE by the end of this year alone.
Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. M 5 Forex/ ForexWebTrader are not liable for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. M 5 Forex/ ForexWebTrader have taken reasonable measures to ensure the accuracy of the information on the website. The content on this website is subject to change at any time without notice.
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