Pound Drops On BOE Inflation Report

NEW YORK (TheStreet) -- The currency market Wednesday saw a flat Asian session, but around the European opening bell the dollar index started declining at a strong pace against the major pairs. However, the selloff was somewhat short-lived since the market came to a standstill and made some attempts to turn around during the Bank of England inflation report.

Looking ahead, the U.S. session will be influenced by the Veterans' Day and Canadian Remembrance Day holidays.

Dollar Index Technical View: TheLFB Member Charts

Four-hour chart: Short. Main price points: 74.95 and 76.82. Looking for: Wave iii

The dollar index has broken through the 75.00 lows recently, driven by a higher equity market. As such, wave V) (see the chart) is now on the way to new lows with a black sub-wave iii in progress, which may hit the bottom somewhere around the 74.20 area. In this zone, traders may look for a corrective bounce into the black wave iv pullback, before the downtrend continues.

The euro (Eur/Usd 1.45035) reached the 1.5050 area during the European session, where the current high of the year is located. The single currency advanced 70 pips throughout the early part of the European session, but despite some attempts it still has failed to move above that area. Once this level is taken out, the road is practically clear up to the 1.5250 area.

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Trade Plan of the Day. Currency Glossary.

The pound (Gbp/Usd 1.6665) saw some attempts to move higher, especially after the better-than-expected labor data numbers, but then saw very strong shot orders coming though the BOE inflation report meeting. At that time, the pound plunged 150 pips in just 15 minutes after the BOE had raised the inflation and interest rates forecasts for the U.K. economy in the near term, but still raised concerns for growth all the way through 2011.