Trading News Archive - August 2007
Sterling shows strength against the Yen.
Sterling shows strength against the Yen.Anthony Boyajian 
31 August 2007
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Sterling strengthened broadly on Friday as reports that U.S. President George Bush would announce proposals to help subprime mortgage borrowers later in the day boosted risk appetite supporting a return to the carry trade.
Stocks in Europe opened higher following a strong run in Asia as investors were more comfortable with risk after sources told Reuters that Bush will outline reforms on Friday intended to help homeowners struggling with subprime mortgages.
This helped high yielding currencies such as the pound which benefits from the relatively risky carry trade where investors borrow low yielding currencies like the yen to fund investments in higher yielding assets.
The following technical analysis gives us a detailed lookout on what is expected to happen to GBP/JPY.
The buying point is at 233.90; based on a bounce of Standard Error Channel
- Fibonacci retracement 50% is the take profit at 235.75
- Second previous resistance will be the stop loss at 232.73
The selling point is at 232.00; based on a break of strong support
- Fibonacci retracement 61.8% is the take profit at 229.00
- Fibonacci retracement 38.2% is the stop Loss at 233.76
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages below the zero line, the shorter term moving average is faster than the long term and is pointing upwards with break of zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI, we can determine that the market is in a bullish direction with break of 30% line.
The momentum oscillator is very important to understand the strength of the market and as we see on the graph; it bounce on the zero line and moving upwards. The Stochastic oscillator breaks 20% line and continues to go higher.
* The following analysis is for information only; Finotec is not responsible for any
decisions or misinterpretations based on the given text.
By Finotec’s professional analyst,
Tony B.
dealingdesk@finotec.com
Finotec Analysis Team
31 August 2007
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