GBP vs USD daily candle chart 18th March 2010

Forecast For GBP/USD - Daily Chart Analysis 18th March 2010

Following the recent period of sideways consolidation around the 1.50 price point, Cable has finally found some traction from this level, with yesterday’s narrow spread up candle building on the wide spread up bar of Tuesday, which first signalled a possible break higher. However, the current rally higher is far from convincing, and whilst the 9 day moving average has crossed above the 14 day to provide a short term bullish signal, the longer term outlook remains heavily bearish for several reasons. First, from a technical perspective we are still well below both the 40 day and 2oo day moving averages which are both well above the current price point, and coupled with the deep congestion which begins at 1.58 and climbs all the way up to 1.67, this present a formidable region of price congestion to any move higher. Furthermore, the futures markets continue to be dominated by increasing open interest, with speculative short sellers adding further positions, which now exceed the volumes when the UK pound was forced out of the ERM in the 90’s, and as result any short term move higher may run out of steam in the 1.5450 price region if indeed the currency  air manage to  achieve this level  at all.

With prices now sandwiched between the various moving averages, it is these that will dictate the short and medium term prospects for the pair. Any move higher will run into the 40 day moving average which may well prevent any further progress, whilst a break and hold below the 9 and 14 day averages will signal a return of the longer term bearish sentiment, which may well gather pace in the next few weeks as we move ever closer to the General Election and the prospect of a hung Parliament.

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