During the Wednesday session, we suspect that very little in the way of economic announcements during the Asian session will lead to a very technical day. After all, it’s not until the Bank of England releases its Minutes of the last meeting until we get a significant announcement. That could have a great effect on the GBP/USD pair, as well as the FTSE. The FTSE has gone a little too far too quickly for our liking, so we think that a pullback is probably in order. However, we think that if the Bank of England suggests that more quantitative easing is on the way, this should be negative for the British pound. That would have the GBP/USD pair selling off, and heading to the 1.65 handle, a trade it makes perfect sense to us.
The oil numbers come out during the US session, and as a result we believe that the inventory numbers could have a significant effect on the WTI market, which of course has been brutally sold off recently. If we get some type of bounce, we are looking to sell as soon as we see resistance. On the other hand, we think that the market breaking down below the lows from the Tuesday session could have this market looking for $92.
The Federal Reserve releases its Minutes from the last meeting as well, and as a result this could have an effect on the GBP/USD pair that was moving during the earlier part of the session. Quite frankly, we could get the perfect storm of dovish Bank of England, and hawkish or at least semi-hawkish Federal Reserve. That should be the last “nail in the coffin” as far as the GBP/USD pair going to the 1.65 handle.
The S&P 500 and other US indices are starting to get a little bit rich for our liking. We need to see a pullback in order to get involved, and we will be looking to the short-term charts in order to do so. The one exception might be the NASDAQ, which is clearly broken out well above the 4500 level. Nonetheless, we have no interest in selling stocks or indices in the United States.