The bears were quick to return on Monday as last week’s massive end-of-week rally created dozens of profit-taking opportunities. Selling pressures from Europe spilled over as lawmakers struggled to set a timetable for moving forward with the proposed unified banking sector over the weekend. Adding to the list of uncertainties, the Empire state index came in worse than expected; worries of a manufacturing slowdown resurfaced after the figure came in at -10.4 versus the previous reading of -5.9 [see also ETF Insider: Bulls Running Low On Fuel, Catalyst Needed].
With British inflation data slated to come out before the opening bell on Wall Street, our ETF to watch for the day is the RydexCurrencyShares British Pound Sterling Trust (FXB, B+). The British pound could experience volatile trading in the currency market following the latest economic report; analysts are expecting for the nation’s CPI to come in at 2.5% versus the previous reading of 2.6% [see also Commodities To Profit From Schiff's Currency Crisis].
The ETF has staged a remarkable run-up since its most recent correction when shares bottomed out at the $152 level in early June of this year; FXB has gained upwards of 9% since June 1, 2012. When looking at the chart below, it’s easy to observe the sheer strength of this uptrend as FXB has been able to pierce right through resistance at the 200-day moving average (yellow line) and charge higher without taking a break [see also 5 Tips ETF Traders Must Know].
Despite this impressive rally, FXB could fall victim to profit-taking over the next few days from a technical perspective; notice how this ETF is right near $162 a share (red line), which is a resistance level that it previously failed to summit on April 27, 2012 [see also ETF Technical Trading FAQ].
The latest CPI data could serve as the fundamental catalyst which tips FXB lower if investors react with pessimism; in terms of downside, this ETF has resistance at $160 a share followed by the $158 level. On the other hand, a healthy inflation reading could propel the British pound higher; in terms of upside, this ETF has major resistance around the $165 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.