head and shoulder

Not so nice head and shoulder, but i still indicate for reversal sign + doji

How Does Raising the Key Interest Rate Strengthen Currency?

The key interest rate (also known as the "prime rate") is the percentage that a central bank or monetary authority charges on loans to commercial banks. Raising this rate strengthens a nation's currency because it raises the returns on deposits in a given currency in relation to other currencies, as well as signaling growth in the economy and a decline in inflation.

Prime Rate

The prime rate of any country is controlled by a central bank or monetary authority. In the U.S., this authority is the Federal Reserve. A country's central bank is in charge of monetary policy, and one of its main tools is the prime rate. The Federal Reserve raises or lowers the prime rate to influence national savings, investment, employment, inflation and the exchange rate. The Federal Reserve usually operates on the basis of targets (for example, the target inflation rate is 2 percent).

Reasons to Raise

Raising or lowering the prime rate has specific effects on the economy. Raising the interest rate encourages savings, controls inflation and discourages borrowing and investment. The higher the interest rate, the more money you can make by simply saving (and if the population spends less, inflation proceeds at a slower rate), and the more expensive borrowing becomes. While all of these factors affect the exchange rate in different ways, it's the savings mechanism that immediately strengthens a currency.

Returns

Raising the prime rate raises the returns (the amount paid in interest) on deposits in that currency. When people can make more money with accounts in one currency as opposed to another, they will buy the more lucrative currency until the exchange rate adjusts to the demand. The exchange rate adjusts almost instantly since both buyers and sellers around the world are aware of what is going on, and buyers will immediately start buying while sellers will immediately start raising their prices.

Example

Assume that the euro and the dollar are at parity (one dollar buys one euro and vice versa), and both the E.U. and U.S. prime rates are at 3 percent with annual inflation at 2 percent. If the Federal Reserve raises the prime rate from 3 percent to 3.25 percent, and all else remains constant, deposits in dollars become 25 percent more lucrative than deposits in euros at that exchange rate. As soon as this happens, anyone involved in currency trading will switch their euros to dollars; however, this activity (high demand for dollars, low demand for euros) immediately pushes up the exchange rate because those selling dollars will start asking for more.

Other Signals

Raising the prime rate sends out a number of signals about a nation's economy. Raising the interest rate often signals strong economic growth, to the point where the central bank can make a move that discourages investment and raises the exchange rate (which makes exports less competitive). Raising the interest rate also lowers inflation and can show that the central bank is interested in controlling inflation, which often reassures investors.

GBPUSD daily outlook & mid-day outlook.

As we know last friday was awesome. Move from 1.6090 Breakout from london open was trigger the trend to reach support price at 1.6000. Yes i won, but because last friday is my 1st entry after almot 8 month silent from market without any blocking price so i was quite nervous while my position below 10 pips. :).

Here i post my chart for daily trend by using Elliott wave prediction. Some how if i analyze back the previous trend for last week, GBPUSD was move 450 pip without any big retracement. By using this case most of trader will expect the truly pull back from bottom. But until now i did not see any reversal sign. Hence i expect it could be break more lower until next support at 1.5905.



Chart above is more like charting technique without used any sense of indicator to indicate market direction. Hereinafter daily just break the fractal. Usually once price was break the fractal in daily 50% is continuous trend or 50% otherwise. I have observe this quite many year. But i dont think this is fractal noise.

If 1.5997 is a price breaking from trendline so i assume wave "a" just moved. Next hassle is 1.5818 nearly with parallel trendline and i expect reversal sign is there.

For this moment whant i can tell is just stay with bearish.



This is 1 hour chart.

Price still stick with channel discipline. I still used this chart to make my wise entry.

my idea is

Open sell at 1.5939.
Exit at 1.5905

However since the price is lower i think quite risk to keep selling. keyword is sell on top. but now is already lower and maybe we will face the next lower. I believe with my system.

Regards
Muhamad Yaqin Mhd Nor.
Chartist.

expected wise

Previous post was indicate how price moving inside channel, and it's proven again when 1.6090 become Resistance. Late friday GBPUSD just kissed 1.6000 as my expected rallies.

Nothing weird after this, it just pull back from 1.6000 and price will play within this range.

I still monitor weekly time frame. For this moment i still cannot give solid direction where are the market heading. Maybe on next week hope for more clear direction.

Happy weekend.

aroma of Q.Ezi..

the next support is 1.600. huh after quite a long time i never wrote about currency analysis, i felt so noob when i want to elaborate. Well this chart just tried to telling us now price is moving inside channel and 1.6 are waiting to kiss.

But how strong this volume to push the market, the whole week started from monday, market has been in bearish mode. Just a little retracement. Becareful with sudden pull back. But what ever it is.. i believe price will not go so far. If pull back it just to kiss trendline.

rgrds