Student’s Question:

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The GBPJPY decline from 13942 appears impulsive. 13680-13750 is a resistance zone. A rally into that zone presents an opportunity to short against the high.

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Greece’s troubles have caused ERU/USD price action to diverge from equity markets which we saw at onset of the issue. The potential that a bailout package from E.U. member nation may not be forthcoming has pressured the single currency.

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The British Pound could face increased selling pressures over the next 24 hours of trading as economists forecast consumer prices in the U.K. to rise at an annual pace of 3.1% in February after expanding 3.5% in the previous month, and the pull back in price growth may lead the Bank of England to maintain a dovish outlook for future policy as it aims to encourage a sustainable recovery.

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The Greek issue will be a driving force for the EUR/USD until a solution is developed. Greek Prime minister Papandreou called the E.U.’s bluff last week by threatening to go to the IMF.

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The Euro has been under pressure since the prospect of a bailout for Greece by E.U. members dimmed with Germany –the region’s largest economy-showing the most resistance. The IMF reiterated its willingness to help the struggling nation, but it is a solution that would cast doubt on the solidarity of the region and the single currency. Bearish sentiment has waned as the pair has come up against major support. We may see a period of consolidation as markets wait for a final resolution to Greece’s issues.

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Forex options market volatility expectations have bounced modestly since last week’s trade, but currently depressed levels offer little scope for major price moves in the week ahead. We accordingly favor low-volatility Range trading strategies which tend to do well in these types of conditions. Due to their superior risk/reward profiles, however, we likewise think Breakout trading styles are worth taking into consideration. Although said price-following strategies often get chopped out through rangebound market conditions, the eventual breakouts lead to gains. Thus we will keep a close eye on Range and Breakout systems while treating trend-following Momentum trades with a degree of skepticism.

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The decline from 13822 has extended below 13530 and is sharp. Expectations are for a small 2nd wave to bring price back to resistance at 13550-13585.

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