Stoyan Bojinov: Domestic equity indexes started off in the gutter on Tuesday so to speak after the latest housing market data sparked a wave of profit taking across Wall Street. Investors fretted over worse-than-expected housing starts in February; this figure came in at 698,000 versus the previous month’s reading of 706,000. Gold slid lower alongside stocks on the day as futures prices for the precious yellow metal shed just over 1%, settling near $1,650 an ounce [see also Gold Hits Resistance, Time To Worry?].
European news have taken a backseat over the past few weeks as Greek debt woes have seemingly subsided. Nonetheless, investors are still paying attention to the economic outlook for the region seeing as how the debt crisis is far from resolved. The British pound could experience volatile trading in the currency markets later today as investors react to the latest economic commentary issued after the Bank of England minutes. In light of this news, the Rydex CurrencyShares British Pound Sterling Trust (NYSE:FXB) is our ETF to watch for the day [see also 3 ETF Trades For The Next Euro Zone Debt Crisis].
FXB has endured a tough start to 2012 as a result of all the looming Euro zone debt drama. Notice that this ETF recently bottomed out at $151.18 a share on 1/13/2012, unlike most other equity benchmarks which have been on a bull-run since 10/4/2011. This ETF has done a nice job of inching higher in 2012, although the past few weeks have been riddled with selling pressures [see FXB Returns].
FXB is trading right around its 200-day moving average (yellow line), which could be worrisome from a technical analysis perspective. This ETF has a history of failing to summit the $158 level; notice how FXB attempted, and failed, to hold over $158 a share back on 2/7/2012 and more recently on 2/29/2012 [see also Euro Free Europe ETFdb Portfolio ].
Seeing as how FXB is trading right near a resistance level, today’s bank minutes could tip it in either direction depending on investors’ reaction. If the Bank of England issues upbeat commentary with an optimistic outlook, the British pound may very well spike higher in the currency market. Likewise, FXB could make a run higher, although investors should note the potential resistance at the $160 level. On the other hand, FXB could find itself struggling if the latest bank minutes paint a gloomier than expected picture [see also ETFs To Bet Against Apple]. In terms of downside, this ETF has support at $155 a share followed by the $152 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Written By Stoyan Bojinov From ETF Database Disclosure: No Positions
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