Daily December British Pound Pattern, Price & Time Analysis
A slew of negative fundamental data this week helped turn the December British Pound down on Wednesday. The selling pressure continued overnight but subsided a bit as the market neared a key 50 percent price level.
Based on the short-term range of 1.5179 to 1.6158, the first downside objective is the 50 percent level at 1.5669. A close under this level could trigger a rapid acceleration to the 61.8 percent level at 1.5553.
Depending on whether the market has reached an oversold level, could determine whether there is a technical bounce or not. Since the contract is clearly in a downtrend, any short-covering rally is likely to set up another shorting opportunity.
Earlier in the week, the Bank of England said that a severe economic downturn in the U.K. will push inflation below 2%. This sent a strong signal to investors that the central bank will need to pump more stimulus into the economy.
The central bank also warned that growth could stagnate until the middle of 2012 and was likely to reach only 1% for the year as a whole. This statement basically cut in half the BoE’s previous forecast.
The primary reason for the revised inflation and growth figures was the uncertainty in the Euro Zone. With forecasts calling for the sovereign debt situation to linger for several more months and fears of contagion mounting, a global recession triggered by the weakness in the Euro Zone is coming closer to reality.
Traders should continue to look for downside pressure to mount over the near-term. Short-term oversold conditions may trigger a fast short-covering rally; however, this is likely to set-up fresh shorting opportunities. There doesn’t appear to be anything in the economic pipeline at this time that indicates a major bottom is even close to forming.
