So basically, the Doji will remain in force as long as NY closes between $1.6050 & 1.6030. A close between 1.6030 & 1.6000 would suggest a gravestone or a bearish inverted hammer. I already mentioned the possibility of a weekly Double Top on Sunday for this week, but we do need the fundamental confirmation for such occurence, which could come in the form of disappointing showing on UK PMI construction (Tues), services PMI and BRC report (both on Wed) and Halifax home prices as well as PPI on Friday. Downside seen extending towards $1.585-, followed by 55-day MA of $1.5660. Aside from these UK-specific risks, the FOMC/Election/Jobs report could further propel these USD dynamics.
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Sterling may have already reached its own inflection point . . . earlier this month when the UK Treasury signalled delaying some of its election manifesto spending cuts. The deafening silence from the credit agencies regarding the latest spending review should end soon. While credit agencies focus on deficits, the BoE and currency traders also focus on the growth aspect. While QE2 has already dominated market circles in the UK, "double-dip" may soon follow if the former does not materialize soon enough. The argument that 3.1% annual CPI is an obstacle to further easing is weakened by the historical fact that BoE CPI has frequently been behind the curve. Betting against GBPUSD has not always been sensible especially at a time of inevitable QE2 by the Fed. But IT SEEMS THE MARKET IS IN THE PROCESS of punishing GBP via BoE QE as was already done to USD via Fed QE2. GBPUSD is dragged by the fiscal validation of BoE QE2. The $1.6 double top in GBPUSD suggests $1.5650 may be retested, a break of which would extend losses towards $1.5350. 4-HOUR, DAILY & WEEKLY stochastics are all pointing down. Shorts protection can start off at $1.5870, with $1.6 acting as a major resistance. And dont forget that gravestone doji on October 15 in cable.
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