CONSOLIDATION

CONSOLIDATION

Market will probably "consolidate" as analyse by technical. May be a day or two for the week. GBP continues to look vulnerable to more downside today.

Sterling was hit by weak CBI industrial orders (-28, -19 expected) early. The report's impact could be seen clearly in EUR/GBP with the cross jumping through 0.8800 to day highs of 0.8825. The rate hike by the PBOC, however, flipped the asset markets to negative and that started EUR/GBP on the path to eventually reach 0.8740. It also saw cable carry on the down trend started from 1.5950 on to 1.57. GBP/USD broke that level when news that BofA was being sued to buy back mortgages, but didn't extend that loss much. Mervyn King's comments were 2-sided and of little impact given other market factors.
     On today's drop we've seen a break of the 20-day moving average, which was acting as something of a trend line for the move, as well as the last retracement low. That, combined with narrowing Bollinger Bands and a Trend Intensity downtick suggest we're moving into a consolidation period.
     The primary event focus for Wednesday will be the release of the minutes from the last MPC meeting. There's also money supply and credit/lending figures due to be reported.

And it is really funny, China's move was a move in the direction of a higher Yuan in a floating market as investments will definitely flows into China and will need to buy more Yuan thus pushing Yuan higher. The general market should harrah rather than reacting with a risk-on. I cannot understand this.

Victor Ho