GBPUSD

No Charts and I don't trade currencies.

Following this week's budget where Mark Carney has been given new tools, I thought I would highlight a few recent articles re UK and Sterling:-

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www.dailymail.co.uk/news/article-2296676...-Osbornes-bacon.html

"It is not yet clear what ‘unconventional’ methods Carney will use. But there are plenty of hints buried in the Budget documents. Among those listed are further rounds of printing money beyond the £375 billion already undertaken."

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seekingalpha.com/article/1283801-is-gbp-...is-waiting-to-happen

Is GBP A Currency Crisis Waiting To Happen?

Mar 18 2013, 14:49 by: Kevin Lester.

( includes: FXB, GBB Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.)

The idea that the UK is facing the possibility of a full-blown currency crisis has gathered increasing momentum since the start of the year, as GBP has continued to battle with the JPY for the dubious distinction of being the world's worst performing major currency (for the record, the JPY has once again pulled ahead in this race to the bottom). Speaking in Amsterdam last week, the Dutch finance minister, and president of the Euro Group, Jeroen Dijsselbloem warned "England is vulnerable…a new sterling crisis could happen again."

Before we get into whether such speculation is justified, or merely hyperbolic European schadenfreude, it is useful to first define exactly what a currency crisis is. Traditionally, a currency crisis is associated with fixed exchange rate regimes (such as the last UK currency crisis in 1992, when GBP was a member of the ERM), and occurs when speculators determine that the peg is unsustainable (normally because it overvalues the currency).

However, a currency peg is not a prerequisite for a currency crisis, which may be defined as a "dramatic change in the country's nominal exchange rate" (Temin, 2013). As GBP (FXB) has no formal peg, a currency crisis could perhaps be linked instead to its 'fair value', as measured by purchasing power parity. Currently, using the OECD methodology for calculating purchasing power parity, GBP/USD (GBB) should currently be trading at about $1.47 on a 'fair value' basis (interestingly, despite the recent poor performance of GBP, it still trades at a premium to the USD; against the EUR it looks about 10% undervalued).

As such, if we use the USD as our benchmark, it would perhaps make sense to view any GBP depreciation of 25% or so below 'fair value' as a GBP 'crisis'; this would imply a GBPUSD spot rate of about $1.10. Such a level may seem implausible, but we have been there before, during the currency crisis of the mid '80s, GBP/USD hit a low of $1.03 (it had been trading as high as $2.40 less than 5 years previously).

So what could trigger a GBP crisis that could see such a significant currency devaluation? Traditionally, there are two (related) factors that can trigger a currency crisis: 1) an unstable external debt position; or 2) a declining level of national competitiveness (often resulting in a large and / or persistent current account deficit). I would also be inclined to add a third factor, in light of the current economic environment: the excessive use of unconventional monetary policy (i.e. quantitative easing) to stimulate the domestic economy. The bad news for the UK is that all three risk factors represent red flags for GBP.

(Only copied page 1 as keeps rejecting my registration to get page 2)

Buy some gold I guess for non currency traders as a hedge?

Maybe not mid-term but definitely possible long term. There should be a bounce off the 2009 low which was either 1.32 or 1.35 (can't remember offhand) but the whole sequence since then appears to have been a continuation symmetrical triangle so a new low below 2009's would be likely to complete the move down from 2007/8 highs.

I've been waiting a while to get a decent short entry since the uptrend support broke but I missed the 1.523 backtest.

There is support here at 1.4944 so maybe a bounce there and then short it. Sorry, no chart yet. Will try and post one a bit later.

Weak £ is good for UK Plc though.

Just saw this and nearly fell off my chair.

Check out the last chart in the link below for gbp/usd
www.ew-forecast.com/newsletter/

Is this a realistic mid term target??

you see the power once it got abv that 15040 level ....

Here's a couple of updated charts close up and from a far....

interesting close & candle, just dipped below the line, this really needs to start turning up above ~15040 level or else you can estimate some further downside targets here, all on the chart to see, maybe we get a morning start effect. look how it also reversed back down from 15233 level to close at the lows again. 15233 key level now for any upside momentum.

dl.dropbox.com/u/40497882/GBP_USD.jpg

dl.dropbox.com/u/40497882/GBP_USDMarch02.jpg

i closed my second long on this yesterday from 15084 @15185 and closed my short banker from 15884 today @ 15024, i think i may regret closing it tho. new month new beginning, cant complain been a good ride this.

trend is clearly down on this. would not surprise me to see this mid 14000's tho, will take a look over the weekend.