Tuesday, October 28, 2008

Long GBP/USD

Is it me or does every single dollar related currency look wacky? The large inflow to the dollar recently has been helped by lower commodity prices and money coming out of emerging markets. But, there still needs to be a correction. Below is the a 10-year daily graph of the pound/dollar. Notice how we hit the last Fib retracement level recently around lows from 03-04. Additionally, as you can see, the last time a big fall happened recently, it was followed by a quick and sharp upswing (around 1.80 prices). Therefore, no big surprise, but I'm expecting the dollar to show some sort of weakness up to the 1.68 level or higher. This would be a great time to start buying the pound at rock bottom prices!