Pound Dollar

Pound Dollar

A defining week for the pounds to dollars pair, which finally broke below the trading channel of the last few months, with a wide spread down candle on Thursday, with Friday’s price action very muted as the pair struggled to recover from this decisive move lower. Whilst the pound was largely helped on it’s way by BOE Governor Kings’ comments that a weak sterling would be ‘helpful’, there is no doubt that technically we have been waiting for a breakout for some months, and these comments finally provided the catalyst. With such a significant breakout, and with sustained and deep resistance above, it seems inevitable that we will see a continuation of the bearish tone this week, and with all three moving averages now pointing sharply lower, the key will be how far the pounds to dollars pair will fall before finding a level from which to re base and provide a platform. Whilst there is some minor support in the 1.59 price region, a deeper move to test support at the 1.53 level seems more likely in the medium term, and given the breakout we should now see a sustained trend lower for the pounds to dollars pair in due course which may well combine with a resurgence in the US dollar.

There are no significant items of fundamental news on the economic calendar for either the UK or US other than a speech from UK Chancellor Alistair Darling at the Labour Party Conference in Brighton which could depress sterling further should he follow the tone set by Mervyn King as outlined above.

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