Sterling Lower on Rate Speculations

Forex Mid-Day Technical Report

Sterling Lower on Rate Speculations, Dollar Remains Pressured

Sterling is sent lower across the board and an otherwise quiet data. Markets seem to be backing off from the speculation that BoE will have to raise rates twice more this year for bringing inflation back to its 2% target. Traders are adjusting their positions, in particular on speculation that this Wed's BoE inflation report could reveal that one more hike is already enough for BoE. The slightly lower than expected industrial production and manufacturing production report today didn't offer particular support to the pound neither.

Elsewhere, greenback remains generally pressured ahead of tomorrow's FOMC rate decision and statement. Markets will be heavily scrutinize the statement on Fed's view on inflation, growth and in particular the extent of subprime problems. Both yen and swiss franc stabilizes after earlier rally today but will remain sensitive to developments in both the stock and treasury markets.
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GBP/USD Insight

Daily Pivots: (S1) 2.0340; (P) 2.0399; (R1) 2.0460;

Cable failed to sustain earlier gains and reverses by falling sharply to as low as 2.0287. Break of 2.0338 minor support left the rebound from 2.0182 with a corrective 3 wave nature to 2.0460, suggesting that correction from 2.0652 is still in progress. Further decline is now is favor to retest 2.0182 low and possibly further towards 2.0056 support before completing the correction.

On the upside, break above 2.0460 high is needed to turn intraday bias back to the upside for 2.0563 resistance and then key medium term resistance of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677.