Oct 312008
 

Having failed at 1.6670 levels, the Pound has come off by over six big figures already. Question is whether we will see 1.5250 soon? There is not much of a doubt that GBP/USD is in a bear trend, and some might think that all we need now is an overlap of 1.5934 to call a direct test of 1.5250. I would like to be a bit more careful in making that call just now. What makes me cautious is the sideways drift from the top. I would really like to see it come down a bit faster than this. Let us see how Asia handles the currency and then decide the next trade.

Oct 302008
 

The Forex markets have been known to be very liquid. But today the liquidity was at its lows. Spread on GBP/USD was 15 pips wide for a mere 10 million quote even when London was in full swing. I imagine this must have been the case even yesterday in NY time because the currency just tore straight up. Can you believe it, but Sterling was at 1.6715 on Oct 22, down to 1.5265 on Oct 24 and back here at 1.6670 on Oct 30? This is crazy! Anyway, I am still of the view that Sterling will come off a bit from here. We will probably see 1.6350 in the next few sessions. I know fortune favors the brave. But it will be the foolish who venture into thin markets with big positions.

Oct 242008
 

I have been looking for Sterling to find support around 1.5850 because that area (as marked in this chart) was respected several times in the past 20 years. But today is a different story. Incredible as it seems, we were at 1.75 just 4 days back, and today’s low was 1.5260. That is a cool 22 BIG FIGURES down. It reminds me of Black Wednesday. As I was repeatedly saying, buying at 1.5850 is not a recommendation for short term traders. It is a recommendation for corporate managers because they have hedging needs, and have a longer term perspective. Even for them, the damage is severe, and if they have not already locked into a trade at that level, they are better advised to wait. As I have explained in the attached chart, getting above 1.5850 now needs help from the Central Bank.

Sterling in a free fall
Sterling in a free fall

Here is yesterday’s chart!

Oct 232008
 

This is a brief update. I acknowledge it is silly to project the pattern that the market will trace. If I were to do some wishful thinking, then it will be an ending diagonal triangle like what is shown on the chart. Take care. Ramki

Oct 222008
 

The sharp sell-off in GBP/USD this morning was on the back of comments from Bank of England Governor Mr. Mervyn King that the UK was probably entering recession for the first time in 16 years. The high for Sterling yesterday 21 Oct was 1.7198. The low today (so far) is 1.6199. That’s an incredible 10 big-figure range in the space of under 48 hours. However, the selling is not finished. I doubt if we will stay above 1.6450 for long. The price as I am writing this is 1.6440. I prepared some charts for my clients earlier today and I share that with you. Take a look. They were prepared for finance managers with long-term exposures. (If you are a short-term player, perhaps you should try selling a small amount near 1.6480 with a nearby stop) and look to take profits below 1.6100. 

Oct 072008
 

The beating that the Royal Bank of Scotland took today is not the sole reason for Sterling’s sharp downmove. The market is really nervous about which other big institution is sitting there with a load of worthless assets. ( As an amusing aside, this quip, also from the FT, says it all:

HM Treasury to stock market: “We stand ready to bail out banks”
Market to HM Treasury: “YOURS!”

Now where is Sterling likely to go? A fifth wave target is around 1.6850. Sterling chart I expect good sellers to show up on any recovery to 1.7730-60 levels. So if you are still holding any GBP positions, you should consider selling them on any direct recovery to that window.

Oct 072008
 

The beating that the Royal Bank of Scotland took today is not the sole reason for Sterling’s sharp downmove. The market is really nervous about which other big institution is sitting there with a load of worthless assets. ( As an amusing aside, this quip, also from the FT, says it all:
HM Treasury to stock market: “We stand ready to bail out banks”
Market to HM Treasury: “YOURS!”

Now where is Sterling likely to go? A fifth wave target is around 1.6850. Sterling chart I expect good sellers to show up on any recovery to 1.7730-60 levels. So if you are still holding any GBP positions, you should consider selling them on any direct recovery to that window.