 Hello and welcome to CMC Markets on Tuesday the 19th of January and the weekly market update. This week I'm going to cover the pound. It's been in the news an awful lot this week, notwithstanding the fact that the Bank of England left interest rates unchanged last week for the 82nd month in a row. But also because it's a very, very big week for UK data now, this morning we had the inflation numbers arising core prices to 1.4% from 1.2%, but headline inflation also nudged up slightly to 0.3%. Nevertheless, Mark Carney has been on the wires this morning to basically make the case that we're probably not going to see an interest rate rise anytime soon, which is a little bit surprising given the tick up in core prices. But when you actually look at underlying commodity prices, I think the likelihood is that this tick up in inflation could well be temporary. We'll get further indications of UK data in the performance of the UK economy later this week with the average earnings numbers, the unemployment numbers, and I think more importantly a good barometer of consumer demand, UK retail sales. Retail sales in the UK have performed much, much better than I think most people could have expected up 5.5% on the year. So that does suggest that the UK economy does appear to be performing fairly well but it's very, very consumer driven. And I think that is the major concern. The economy is slowing down. We're now seeing daily reports, I think, of job losses in the manufacturing sector and the oil and gas sector. And I think going forward that could have a significant breaking effect on consumer demand as we head into 2016. Purposes of this video, I'm going to look at the pound against the dollar because the pound has performed really badly against the dollar over the course of the last two years. It's down quite significantly. It's by far the worst performer. You've also got the Japanese yen and the Swiss franc. They're slightly up against the pound but certainly the dollar is basically blowing it into the weeds because of divergent interest rate expectations between the Federal Reserve and the Bank of England. And we are now approaching some very key support levels and I will outline those key support levels in the ongoing analysis I'm going to be doing shortly. I'm going to make a start with a very long term monthly chart because, and it's a line chart, it's not a candle chart or a bar chart because in the context of this particular piece of analysis, the monthly close is really the all important number that we're looking at here. Now seven years ago, January 2009, the pound traded in almost a 20 big figure range against the dollar. It traded as high as 153 in January 2009. The one as low as 135 and managed to close well above 141.50. Now the all-time low for cable is way back in 1995 at 105.20. Since we broke above 105.20 back in 1985, the pound has never closed on a monthly basis below 141.50. So that makes it a very important line in the sand in the context of a monthly close and we're right just above that key level right now. We've taken out the May 2010 lows at 142.20 and we're flirting with the 142 level as I speak. So it's a very, very key chart point on a historical, a very long-term historical basis. So where we close at the end of this month is going to be very, very all important. Now let's move on to the daily chart. Now for the purposes of this analysis, what I've done is I've taken a daily candle chart. I've drawn in the May 2010 lows and I've also drawn in the lows so far this month, which is round about the 142 area. Now if we look at the slow stochastic, we can see that it's very oversold on the daily chart. If we look at the weekly slow stochastic as well, we can see it's very oversold as well. And if we look at the client sentiment, cash positions are 92% short. Given the fact that we've come down from round about 154 at the beginning of November, we're trading about 142, sentiment is very, very bearish on the pound against the dollar. And to be quite honest, if you're looking at it in the context of further US interest rate rises, I'm not convinced that we're going to see any more. So I would argue that actually spreads between two-year guilt yields and two-year treasury yields already at their widest levels in 20 years are looking a little bit stretched. That's going to make us very, very susceptible to very sharp, short squeezes. And I think you're looking to go short cable. You need to be very, very cognizant of the risks of doing that. Because historically, and I heart back to the January 2009 range, we traded the 153, 135 range. Cable is no stranger to volatility. So at these sorts of levels, I'll be very, very cautious about being short sterling. So that's it for this week. Once again, thanks very much for listening. One thing I would say in the context of this particular video, Colin and myself will be hosting another pre-FOMC webinar on the 27th of January at 3pm. We'll put the details on the website sometime later this week. Until next week, we'll have another video before then. Until next week, this is Michael Houston talking to you from CMC Markets.