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British Pound To Consolidate Following Sharp Rebound, Japanese Yen Could Face Range Bound Price Action

British Pound To Consolidate Following Sharp Rebound, Japanese Yen Could Face Range Bound Price Action

2011-02-10 18:06:00
David Song, Currency Strategist
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Daily Winners and Losers

British_Pound_To_Consolidate_Following_Sharp_Rebound_Japanese_Yen_Could_Face_Range_Bound_Price_Action_body_ScreenShot012.png, British Pound To Consolidate Following Sharp Rebound, Japanese Yen Could Face Range Bound Price Action

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

GBPUSD

1.6132

1.6138

1.6012

30

126

British_Pound_To_Consolidate_Following_Sharp_Rebound_Japanese_Yen_Could_Face_Range_Bound_Price_Action_body_ScreenShot010.png, British Pound To Consolidate Following Sharp Rebound, Japanese Yen Could Face Range Bound Price Action

The British Pound recouped the losses from the overnight trade to reach a high of 1.6012, and the sterling may continue to trend higher going into the end of the week as it maintains the upward trend carried over from the previous month. The GBP/USD is 30pips higher on the day after moving 87% of its average true range, and the exchange rate may continue to pare the decline from earlier this week as it appears to have found near-term support around former resistance at 1.6000. As the Bank of England maintains its current policy in February, interest rate expectations are likely to gather pace going forward, and speculation for a rate hike later this year should translate into additional British Pound strength as investors weigh the prospects for future policy. However, as the rebound in the relative strength index tapers off ahead of 70, the exchange should consolidate going into the Asian trade, but the rise in U.K. producer prices could spark a short-term rally in the pound-dollar as the central bank holds a hawkish outlook for inflation. In turn, we may see the GBP/USD make another run at 1.6300 going into the end of the week, and the exchange rate should maintain the upward trend from January as investors speculate the central bank to gradually normalize monetary policy later this year.

Key Levels/Indicators

Level/Indicator

Level

10-Day SMA

1.6083

20-Day SMA

1.6005

100-Day SMA

1.5820

Daily RSI

61

Upcoming Events

GMT

Importance

Release

Expected

Prior

9:30

MED

Producer Price Index Input n.s.a. (MoM) (JAN)

1.4%

3.4%

9:30

MED

Producer Price Index Input n.s.a. (YoY) (JAN)

12.7%

12.5%

9:30

MED

Producer Price Index Output n.s.a. (MoM) (JAN)

0.5%

0.5%

9:30

MED

Producer Price Index Output n.s.a. (YoY) (JAN)

4.4%

4.2%

9:30

MED

Producer Price Index Output Core n.s.a. (MoM) (JAN)

0.3%

0.2%

9:30

MED

Producer Price Index Output Core n.s.a. (YoY) (JAN)

3.0%

2.9%

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USDJPY

83.1200

83.29

82.34

76

95

British_Pound_To_Consolidate_Following_Sharp_Rebound_Japanese_Yen_Could_Face_Range_Bound_Price_Action_body_ScreenShot011.png, British Pound To Consolidate Following Sharp Rebound, Japanese Yen Could Face Range Bound Price Action

The Japanese Yen continued to weaken against the U.S. dollar, with the USD/JPY advancing to a fresh monthly high of 83.29, and the exchange rate may continue to push higher as it breaks out of the downward trend from the end of the previous year. The USD/JPY is nearly 80 points higher from the open after moving 129% of its ATR, but we are likely to see a corrective retracement unfold going into the Asian session as the relative strength falls back from a high of 82. In turn, we may see the dollar-yen look to close the gap from the 120-SMA at 82.44, and the pair may consolidate going into the end of the week as the near-term rally appears to be slowing ahead of 83.50-70, the 23.6% Fibonacci retracement from the 2010 high to low. If the USD/JPY finds resistance at the 23.6% Fib, price action should trend sideways over the coming days as support holds at 81.00, and the dollar-yen may offer a good range-trade opportunity as it breaks out of its recent trend.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

82.74

100-Day SMA

82.59

20-Day SMA

82.32

Support

81.00

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To discuss this report contact David Song, Currency Analyst: instructor@dailyfx.com

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