Pound Dollar 6 May 2010

The rally in cable from the previous low of USD1.48 in late March now seems to have petered out and is in the process of forming a rounded top giving us a typically bearish technical picture as we now approach the psychological USD1.50 once again with a possible re-test of the established platform now in place at USD1.48.  Tuesday’s price action was particularly important with the session ending below all four moving averages once again and this was further reinforced in today’s early trading as cable moved lower to test the USD1.50 area.  The 9 day and 14 day moving averages are now turning lower and indeed should this both cross the 40 day moving average in due course then this will add further to the current bearish sentiment.  The other significant candle of the last two weeks was that of Tuesday last week where we saw a bearing engulfing candle which has now been validated and marked the failure to breach the USD1.55 price handle.  All of this is against the backdrop of the UK general election, the outcome of which is still uncertain, and whilst many commentators are suggesting a significant sell off in sterling should the result indeed be uncertain this is far from clear and may indeed have already been factored into the price.  The longer term weekly chart tends to reinforce the bearish analysis with prices now moving below both the 9 and 14 week moving averages and should we see a breach of USD1.48 in due course then we could see cable fall sharply, possibly even to re-test USD1.40 in due course.

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