Pound  vs Dollar Daily Candle Chart - GBP/USD 7th August 2009

Pound vs Dollar Daily Candle Chart - GBP/USD 7th August 2009

Having already written in previous commentaries that the technical picture for the British Pound was somewhat weak Cable duly received a shove lower yesterday from the Bank of England, not based on the rate decision which remained on hold, but due to the further injection of money into the economy to the tune of £50bn.  Clearly the BOE is of the opinion that the recession/depression is far worse than anticipated and likely to stick around for much longer.  In addition they would have been aware of the IMF’s view that sterling would be overvalued at USD1.70 – their opinion is a rate of around USD1.53.  The market duly obliged and Sterling fell heavily ending the day on a wide spread down bar which also gave us a bearish engulfing signal.   Today, of course, is Non Farm Payroll Data which will, no doubt, lend its own unique brand of volatility, and depending on the eventual numbers we could see Sterling fall even further.  However, given the depth of support accumulated over the past 2 months and sitting immediately below it is hard to see any reversal penetrating this level in the short term, unless the NFP data is so bad that it actually changes market sentiment back towards the US Dollar, which may well be the case given the somewhat precarious nature of the equity markets – the S&P500 in particular.  For those of you who like to trade the NFP the pounds to dollars pair may offer more opportunities today.

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