Divergence in Indicators Forming

Our pair continued the consolidation pattern as expected last week, using the US Non-Farm Payroll surprise to rebound back to where it started the week at. But of interest to note is even though the pair was flat on the week, the indicator we used to initiate the trade (The Deutsche Bank US Dollar-Short Futures Index - $USDDNX.X) closed higher.

The increase in the number of traders putting money into US Dollar short positions reaffirms that we should still be long in our current trade. The fundamentals for our position were further reinforced with Fridays unemployment jump in the US.

Since we had no technical or fundamental indicators to the contrary, we increased our position slightly on last weeks pull back. Our stop still remains firm at 1.9360, as any break below this level will indicate a potential resumption the down trend. A move above 1.9850 however, will place a higher low and higher high on the daily GBP/USD chart, putting us in a technical short term up trend.

As we stated in the post of 5/25/2008, we are expecting this trade, as well as the summer trading season, to be a wild one. We did mention in last weeks post that we would discuss our research tools we use to keep an eye on the money flow from global tourism. We apologise for the delay, but will get it put together soon. We are double checking to make sure we do not violate any ones copyright before we post.

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