Pound Dollar Chart 29 Sep 2009

Pound Dollar Chart 29 Sep 2009

With the breakout below the 1.60 level now complete for the pounds to dollars pair, we should expect to see a bearish trend for the pair over the next few weeks, following Mr King’s helpful comments which propelled the UK pound lower last week in spectacular fashion, and provided the catalyst for the long awaited breakout from the months of sideways consolidation. Indeed, yesterday’s candle opened the currency trading session gapped lower, adding further to the bearish picture now in place, and with all three moving averages now pointing sharply lower, there seems to be little prospect of a bounce in the short term, with the session closing with a small doji cross.  The key to the depth of this move will be whether the minor support level at 1.5850 provides any kind of platform, and if not ( which is what I expect) then we should see a much deeper move to test the major support region at 1.5250 in the medium term. With  strong resistance now above, any attempt to move higher will require considerable momentum to break through this deep congestion, and given that the pounds to dollars pair failed to break higher for several months, any short term attempt to re-test this level seems unlikely to succeed and therefore I believe we are now due a period of sustained bearish sentiment on the pounds to dollars pair for some time to come.

The main item of fundamental news on the economic calendar for the UK today was the Current Account figures and Final GDP figures, coupled with Net Lending, Mortgage Approvals and CBI Realized Sales.   The first of these represents the difference in value between imported and exported goods, services, income flows, and transfers during the previous quarter, and was forecast at -7.7B against a previous of -8.5B and is an important number as it indicates the demand for the home currency, in this case UK sterling. A rising surplus means that more foreigners are buying the currency, whilst falling indicates the opposite. The actual was worse than forecast at -11.4bn. This data is followed by the Final GDP figure which is forecast at -0.6% against a previous of -0.7% – this data is less important than the Current Account as it simply confirms the figures released recently (the last of three)  and therefore has a relatively muted impact on the pounds to dollars pair when released and it came in on target.  The same is also true for Net Lending and Mortgage Approvals, which again tend to have a mild impact on the markets with the frst forecast at 0.3B against a previous of -0.6B, showing lending is increasing once again, and the second forecast to show a very small increase on last month up 1,000 from 50,000 to 51,000.  The actual numbers were 0.7b & 52k respectively & both better than expected.

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