Pounds To Dollars - Monthly Chart 1st June 2009

With many analysts believing that the British Pound was unduly punished, its spectacular fall of late 2008 is being mirrored by an equally spectacular rise in 2009 a performance clearly demonstrated in the monthly chart with May closing on a very wide spread up bar which breached and held above the 9 month moving average and with no shadows to top or bottom.  This momentum has carried into the first day of June with another strong surge higher and the only resistance between here and 1.73, this seems the next likely stopping point, assuming that the sustained dollar weakness continues unabated as seems likely at present.  What is interesting about the monthly chart are the January, February and March candles which resulted in 2 long legged dojis and an inverted hammer, which together provided a clear sign that a reversal was likely and certainly overdue given the strong support created at the same level in 2001/2002.  Indeed I did outline this in my market commentaries earlier this year.  Clearly the only way to trade this pair at present is with a bullish bias given that the shooting stars of last week were not confirmed, as expected, and the price move simply carried on unabated and for longer term position trading the next target is at 1.71 where we may see a degree of slowing in the rate of progress and possible sideways movement as we approach this congested region.  For a broader market view of the dollar I would recommend keeping a very close eye on the dollar index which at present is confirming the market’s bearish view of the dollar.

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