Although we are expecting a 5th wave up there is dwn side Potenial

Sterling volatility to increase Thursday

        -- Downside momentum to increase significantly below $1.5971

        -- 6-month bull pennant suggests weakness to $1.5400

        By Francis Bray, CFTe MSTA

        A DOW JONES NEWSWIRES COLUMN

        LONDON (Dow Jones)--Sterling is attracting some volatility Thursday from a slew of fundamental data, and the technical viewpoint for GBP/USD suggests there is a growing threat for weakness to the $1.5752 low.

        With data for December's U.K. Industrial Production and Manufacturing Production for December already disseminated into the market, the Bank of England will announce its latest decision on U.K. interest rates at 1200 GMT. The overwhelming consensus is that the rate will remain unchanged at 0.50%.

        Tuesday's marginal low at $1.6028 is facing renewed bear pressure in the run-up to the rate announcement, and a break below there would extend the bear wave off $1.6277 to test projected support at $1.5971.

        However, increasing bear momentum is likely to force a break below $1.5971, to leave the Feb. 3 reaction high at $1.6277 as a potential bear failure and pave the way for sharp weakness to $1.5925 and $1.5870. For details, see the GBP/USD daily chart.

        http://www.dowjoneswebservices.com/chart/view/5397

        The $1.5870 target is a 1.618 Fibonacci extension projection, but to confirm $1.6277 as a bear failure, a deeper setback is necessary below the Jan. 25 reaction low at $1.5752.

        This scenario would place the longer-term picture within a six-month bull pennant continuation pattern, and create downside scope to the $1.5400 area.

        The negative outlook would be tempered if the downside threat fails to force a break below $1.5971. This would keep the short-term uptrend off the December 28 reaction low at $1.5347 structurally intact, and re-open the week's high at $1.6185.

        But only regaining ground above $1.6185 would attract further gains to $1.6277 and the November 2010 $1.6298 reaction high.

        At 1018 GMT, GBP/USD is at $1.6065.

       

        (END) Dow Jones Newswires