Euros to Pounds - Weekly Candle Chart February 9th 2009

Euros to Pounds - Weekly Candle Chart February 9th 2009

Following the bearish engulfing candle of two weeks ago, we did indeed see prices fall in the $uros to poundsrency pair last week as expected, and I hope you were able to make some money from your short positions. Whilst last week’s down bar was as expected, it was perhaps not as wide a spread as we would have hoped for, but never the less the closing price on Friday closed below both the 9 week and 14 week averages, adding weight to the move. The attempt to retest the 0.91 region also failed, which is another good signal. The immediate area of concern this week is the small support level at 0.85, but if this is breached then we should see a further fall to test the major support at 0.8100.

On the $undamental newsnt, the principle day for the pound is Wednesday, when we have three pieces of news which will move the currency. The first of these is the Claimant Count Change, which as the name suggest is the number of new people added to the benefits register in the UK and claiming unemployment benefit, with a forecast of 87,000 against a previous of 78,000 which will hardly be a great surprise to the market. This is followed later in the morning by a statement from Bank of England Governor Mervyn King, followed by an inflation report, all of which will be closely watched by the markets for any signals as to the future monetary policy and strategy for the BOE ( although whether they have any understanding of what is happening at the moment is debatable!) For the euro, the only significant set of figures are the German Preliminary GDP out on Friday, followed by the first day of the G7 meeting which are attended by finance ministers and central bankers from seven industrialized nations namely:- Canada, Italy, France, Germany, Japan, the UK, and the US. The meetings are closed to the press but officials usually talk with reporters throughout the day, and a formal statement covering policy shifts and meeting objectives is released after the meetings have concluded. Both the comments and statement can create significant market volatility. While it’s not an institution, the G7 is an influential global policy-making body operating at the highest level, and their initiatives and policies can have a substantial impact on currency markets.My suggestion for this week is therefore to continue with our bearish positions for the time being, and to look for entry and exit points using the daily charts, with stop losses set in the 0.91 region and above, but with a view to closing out on Friday, as the G7 meeting runs over the weekend and any volatile moves could occur as markets open Sunday night.

The short term outlook is bearish, the medium term is bearish and the long term is sideways.