My picks: Short GBPUSD (pending)
Expertise: Global Macro, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
The fundamental reasons to be short GBPUSD are fairly straight-forward: the latest economic growth forecasts suggest the US will outperform the UK by 1.4% on average in 2009 and 2010, suggesting the Fed will lead their counterparts at the BOE in raising interest rates and unwinding quantitative easing measures; from a valution standpoint, GBPUSD is highly overvalued versus its implied "fair" exchange rate, bolstering the bearish scenario. Technically, GBPUSD has put in a formidable Bearish Engulfing candlestick ahead of resistance marked by the swing high from late October of last year, suggesting that a top may be in place. That said, prices are trading above an upward-sloping trend line that has served as an axis of oscillating for the most recent GBPUSD up move and a break below this jucture (currently at 1.6048) as confirmation is favored before taking an outright short.
