Pound Dollar Chart 8 Feb 2010

A defining week for the pounds to usd which ended on Friday with a wide spread down bar on the weekly chart as dollar strength continued to dominate the major currency pairs.  Moving to the daily chart the key event occured on Thursday with the final break below the floor of the recent sideways consolidation which we can now assume has come to a final conclusion with Friday’s wide spread down bar confirming that the breakout is now complete.  With all three short term moving averages pointing sharply lower and with the 200 day moving average adding further downwards pressure the pounds to usd pair looks set for a sustained decline in the medium term although we could see a short term rebound as the dollar index pauses on its approach to a tricky technical area which includes resistance and the 200 day moving average.  With the deep consolidation region of the last six months now firmly established above it will take a sustained effort for cable to break back above this price zone in the short term and for the time being we can expect a further fall, possibly as far as USD1.50 and perhaps even below this price handle, in due course.

In the absence of any fundamental news today markets are understandably looking for direction, probably from the problems with sovereign debt,  and we really need to wait until Wednesday when we have the  UK manufacturing numbers, a statement from the BOE and US trade balance.

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