The dollar was still reverbarating after treasury Secretary Tim Geithner turned investors off with his no-details approach on the government's plan to save troubled banks. The stock sell off and flight from risk which occured right after the speech took the dollar stronger against the higher-yielding euro, pound and australian dollar, with the pound retracing fully 61.8% of the recent upswing from the low established on Jan. 23. Once S&P futures found support at Tuesday's low, prices turned around and the dollar began falling against the aforementioned currencies.
The daily candle on the pound showed something really remarkable today. We have a trend line on the daily chart that connects the high from Sep. 19 to the high on Jan. 06, which cable surpassed on Feb. 05. Today, the low price on the pound hit nearly exactly on the line, seemingly using it as a support level (1.4315 daily low vs. 1.4309 trend line). Long-dated lines such as this can be very useful to traders for one simple reason; they're obvious, which means a lot of traders are likely to be looking at them.
The Bank of England’s forecasts show the economy will contract at an annual 4% rate in Q1 with inflation down to a miniscule 0.5% by end-2010. BoE Gov King said “Given its remit to keep inflation on track to meet the 2% target in the medium term, the projections published by the committee today imply that further easing in monetary policy may well be required.”
We also like to use 30 minute trend lines from the start of each week's trading. Those lines often connect with important levels from the previous week, but the early action which occurs from the beginning of a new week tends to make these lines significant.
We've also been looking at a daily trend line on the euro, connected from the high on Dec. 18 to the Jan. 28 high. That line was breeched on Monday and Tuesday, although price managed to close above the line both days. On Wednesday, the euro toched the line on Wednesday's low.