Trade Idea: 2012-2-16 2:02

The dollar has been on a rally hasn't it? However, I have a few reasons up my sleeve to think that it's about to end soon. For one, I believe that the downward move on GBP/USD is already overdone.

On the 15-minute chart we see that the pair has been slowly making lower highs. However, I think it's noteworthy to point out that it has failed to make a new low. This leads me to think that the rally could be over soon.

I won't be too hasty in pulling the trigger though. I will wait for GBP/USD to break the resistance at the falling trend line. So, I'll look to buy GBP/USD around 1.5700.

On the fundamental side of things, we just saw the FOMC meeting minutes reveal that the Fed was pretty open to quantitative if the U.S. economy were to become worse. While it has not happened yet, I think that traders could start pricing in their expectations already. Remember, quantitative easing is usually considered bearish for a currency.

In the U.K., we've been seeing a couple of good reports. Their consumer price index, for instance, continued to taper down. The last report came in at 3.6%, down from its high at 5.2%. Additionally, the manufacturing PMI, Halifax HPI, Manufacturing Production, and Trade Balance ALL beat consensus.

So, based on both my fundamental and technical analysis, I think the pair is going to head higher soon and break the falling trend line. Hopefully, I got it right.

XOXO,

Huck

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