SELL RECOMMENDATION ISSUED FOR MONDAY @0.9090
Fundamental Catalyst – The lack of event risk on Monday’s calendar is shifting all of the market focus to the UK today, with the ongoing concerns within the domestic financial sector seemingly elevating this morning, in light of the news that Lloyds Bank will now join the government Asset Protection Scheme (APS), while Barclays is also negotiating some form of rescue for a reported GBP60B in toxic assets. Meanwhile, Bank of England Bean has warned that the UK is in the early stage of a “particularly nasty recession.” Finally the British Chambers of Commerce (BCC) has come out with an even gloomier and more downbeat outlook on the UK economy, which has been seen weighing on Sterling. Nevertheless, from a data standpoint, the releases over the past several weeks out of the UK have begun to come in better than analyst consensus, to potentially warn of a bottom within the beaten down economy. In contrast, Eurozone data has begun to disappoint more consistently, and we see the greater risk from here for a more rapid Euro depreciation. Effective monetary policy will be the key to recovery in our opinion, and it is quite clear that the BoE has been more aggressive in their reaction to the financial crisis than their European counterpart. It stands to reason that whichever countries are able to get ahead of the curve the quickest will manage to come out of this global recession fastest.
Techs – Friday’s bullish price action has carried over into Monday with the cross ascending to multi-day highs well into the 0.9000’s thus far. However, the cross has been in the process of carving out a major top on the daily chart with a life-time high at 0.9805 from late December, followed by a confirmed lower top by 0.9520 from late January. A fresh lower top is now being sought out with falling trend-line support off of the previous levels coming in just under 0.9100. As such, we will look for an opportunity on Monday to sell by the falling trend-line resistance in anticipation of bearish trend resumption. The 50% fib retrace off of the 0.9520-0.8635 move and 38.2% retrace off of the major 0.9805-0.8635 move directly coincide at 0.9075, while the previous high from February 2 at 0.9085 all help to contribute to the strong confluence of resistance just under 0.9100. Strategy: SELL @0.9090 FOR A 0.8810 OBJECTIVE, STOP @0.9160. Stops to be trailed to cost on a break back below 0.9050. If trade triggers and 0.9050 not broken, position to be closed out at NY close (5pm EST) on Monday. Recommendation to be removed if not triggered by NY close on Monday.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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