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Forex Chart Analysis – Pound vs Dollar 18th August 2009

Forex Technical Analysis

The pounds to dollars pair continues to mirror the Eurodollar, both of which promised much with the recent breakout from their respective trading ranges only to fail to deliver and promptly reverse.  Yesterday’s  widespread down bar brought the pounds to dollars pair firmly back into the trading range between USD1.60 and USD1.66 and with the 9 day now crossing the 14 day moving average this too is adding to the bearish sentiment.   It is interesting to note that yesterday’s opening price was gapped down from Friday’s close adding further weight to this technical picture.  The extent of this current reversal for the British Pound will depend on a number of factors, including whether equity markets and commodities continue to tumble and forex traders continue to take a dim view of the BOE’s recent decision to expand its QE strategy.

Fundamental Forex Analysis

The fundamental news on the economic calendar for Sterling today centres around the CPI data which is considered by many forex traders as the most important piece of inflation data since it is used by the Bank of England to gauge inflation or deflation in the broader economy.  The forecast for this morning’s number is 1.5%, against a previous of 1.8% representing a further fall to its lowest level in almost 5 years as declines in food prices combined with aggressive summer sales push the number further below the Bank’s target.  At the same time we have the RPI numbers and Core CPI numbers with the first of these expected to come in at -1.7% against a previous of -1.6% and the Core CPI to come in 1.5% against a previous of 1.6%.  Should these numbers come in on target or below expectation then there is little immediate prospect of a rise in interest rates and we could therefore see Sterling come under pressure in this morning’s forex trading session.  Meanwhile in the US forex traders will be watching the PPI for any signs of deflation as well as a clutch of housing data which includes Building Permits (the most significant number this afternoon) to see if the US Housing Market has indeed bottomed.  All of these are covered in more detail on the usd to cad site.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.