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British Pound Rally Slows Ahead of BoE Inflation Report, New Zealand Dollar To Hold Range

British Pound Rally Slows Ahead of BoE Inflation Report, New Zealand Dollar To Hold Range

2011-02-15 16:28:00
David Song, Currency Strategist
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British_Pound_Rally_Slows_Ahead_of_BoE_Inflation_Report_New_Zealand_Dollar_To_Hold_Range_body_ScreenShot015.png, British Pound Rally Slows Ahead of BoE Inflation Report, New Zealand Dollar To Hold Range

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

GBPUSD

1.6146

1.6171

1.6008

108

163

British_Pound_Rally_Slows_Ahead_of_BoE_Inflation_Report_New_Zealand_Dollar_To_Hold_Range_body_ScreenShot016.gif, British Pound Rally Slows Ahead of BoE Inflation Report, New Zealand Dollar To Hold Range

The British Pound continued to pare the decline from earlier this month to reach a high of 1.6171 on Tuesday, and the near-term rally in the exchange rate may gather pace over the next 24 hours of trading as the Bank of England maintains a hawkish outlook for inflation. The GBP/USD is 100+pips higher on the day after moving 115% of its average true range, and comments from the central bank could push the sterling higher throughout the remainder of the week as investors speculate the MPC to gradually normalize monetary policy later this year. However, the two-day advance may taper off ahead of the BoE’s quarter inflation report as the relative strength index holds below overbought territory, and we may see the pound-dollar fall back towards the 240-SMA at 1.6057 going into the Asian trade as investors scale back their appetite for risk. Nevertheless, the bullish momentum behind the GBP/USD should gather pace going forward as the central bank retains a hawkish outlook for future policy, and the pound-dollar may make another run at 1.6300 if the central bank shows an increased willingness to lift the benchmark interest rate off of the record-low later this year.

Key Levels/Indicators

Level/Indicator

Level

2011 High

1.6277

10-Day SMA

1.6097

20-Day SMA

1.6027

100-Day SMA

1.5827

Upcoming Events

GMT

Importance

Release

Expected

Prior

9:30

HIGH

Jobless Claims Change (JAN)

-4.0K

-4.1K

9:30

MED

Claimant Count Rate (JAN)

4.5%

4.5%

9:30

MED

ILO Unemployment Rate (3M) (DEC)

7.9%

7.9%

9:30

LOW

Average Weekly Earnings inc Bonus (3MoY) (DEC)

2.0%

2.1%

9:30

LOW

Average Weekly Earnings ex Bonus (3MoY) (DEC)

2.3%

2.3%

10:30

HIGH

Bank of England Quarterly Inflation Report

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZDUSD

0.7524

0.7587

0.7517

43

70

British_Pound_Rally_Slows_Ahead_of_BoE_Inflation_Report_New_Zealand_Dollar_To_Hold_Range_body_ScreenShot014.png, British Pound Rally Slows Ahead of BoE Inflation Report, New Zealand Dollar To Hold Range

The New Zealand dollar extended the decline from the previous week to reach a fresh yearly low of 0.7517, and the high-yielding currency may continue to push lower throughout the remainder of the day as investors scale back their appetite for risk. The NZD/USD is 40+ points lower from the open after moving 88% of its ATR, but we may see a small reversal in the exchange rate as it comes up against support at 0.7500. As the RSI continues to hold above 30, the New Zealand dollar may recoup the overnight losses and work its way back towards the 120-SMA at 0.7570 as the near-term decline fails to produce a break below 0.7500. In turn, the NZD/USD may trend sideways over the near-term as the Reserve Bank of New Zealand maintains a neutral outlook for future policy, and the kiwi-dollar may present a good opportunity to trade the range as the selloff in the exchange rate tapers off.

Key Levels/Indicators

Level/Indicator

Level

20-Day SMA

0.7675

50-Day SMA

0.7607

100-Day SMA

0.7604

Daily RSI

38

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

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