British Pound Cross Pick 02.16.2011
After tightening my stop on the short GBP/USD trade to cost (1.6035), I got pushed out of the position as the exchange rate slipped to a low of 1.5986, but I may take a stab at playing the range-bound price action as the pair holds above the monthly low at 1.5962. Despite the mixed outlook held by the Bank of England, market participants expect the central bank to hike borrowing costs by at least 75bp over the next 12 months according to Credit Suisse overnight index swaps, and interest rate expectations may gather pace going forward as the MPC expects inflation to hold above the 2 percent target until the second-half of 2012. In turn, if we see the GBP/USD close above the 20-Day SMA at 1.6028, I will look to buy at market and look for a test of the 23.6% Fibonacci retracement from the 2009 low to high around 1.6200, with the stop at 1.5986, the overnight low.
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