FX Fundamental Analysis
trend of getting to ultimate price destinations by taking the scenic route. Such a move higher before giving into fundamentals could be driven by the probability that option barrier triggers may lurk at around those slightly higher levels, if so these will likely be almost magnetic in attracting a move in that direction, prior to some kind of capitulation lower that could be seen if the Fed hikes or the political sit u a t io n worsens in Europe, for example. EUR 1.20 is not out of the question.
Sterling (a.k.a.
“the proud pound” in certain circles) has had a slightly wider range, around six cents, between 1.6250-1.6830, but given the slightly higher valuation of GBP against
the USD this to trade is sideways
(and therefore the real power) of the incumbent coalition government, and as always there are many opinions on the subject! It has to be said that based on a fresh pickup in the UK’s housing market, a steady performance on GDP output,
of the recently found strength - let alone anything unseen or additional - may be at risk of disappearing once the market starts talking about the general election next year.
The year so far has begun with some of the tightest ranges seen in a number of years
roughly
consistent percentage-wise with the Euro’s fluctuations. GBP may continue
or
even take a backseat to an extent, given the current discussions on a geopolitical level about the future
48 FX TRADER MAGAZINE April - June 2014
stable inflation, debt repayments and deficit reduction, Sterling has rightly appreciated quite nicely on a fundamental basis. The question remains, how long can this continue for, even if some support is provided by the BoE hiking rates later this year. We believe the BoE is more likely to raise than not, yet much
Almost incredibly, at least by recent history, USD/ JPY has also had an approximate 4 percent range, from just above 105 at the start of 2014, dipping ma r g i na l l y below the 101 level last month (barrier options- related?) to c on s o l i da t e at around 102 presently. Regular readers of our published material may remember that we were one of the most bearish on the street back in 2012 when USD/JPY was trading at 80. We called for a break above
100, which at the time of writing seemed at best a long way off, about 25%. The rate did eventually move sharply higher from 80 to 103 within six months from November 2012 to May 2013 but has not done that much since then. Over the years, we have found through experience and research that currencies can
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