pounds to dollars

Pounds to Dollars 13 Oct 2010

The pounds to dollars pair once again appears exhausted as it approaches the USD1.6000 price handle, repeating the pattern that we saw back in early August, which saw the pair retrench to test the USD1.53 price region before recovering.  Whether this pattern is repeated once gain, only time will tell, however, last Thursday’s deep up thrust candle which touched a high of USD1.6018 has given us a possible early warning signal that the present price action is running out of steam.  We saw further evidence of this yesterday on the daily chart with a break and hold below both the 9 and 14 day moving averages.  In today’s forex trading an attempt to rise appears, once again, to have run into resistance from the short term moving averages now immediately above and for the time being we can expect to see a further period of sideways consolidation at this level.  Moreover, it is interesting to note that the 200 day moving average is slanting to the downside also suggesting that the current move is exhausted.  For any continuation of the upwards rally we need to see a break and hold well above the USD1.60 level which would then provide the requisite platform of support for the next leg up in the move.  The irony, of course, from a fundamental perspective is that we are expecting a period of sustained US dollar weakness while the markets wait for the FED to implement the next round of quantitative easing – QE2 – and as such would lead to cable rising but this is far from certain at present.

As in the US the employment picture for the UK remains weak with today’s claimant count coming in at 5.3k against a forecast of 4.3k and a previous of 3.8k. The only other significant item of fundamental news for the UK this week will be the inflation report hearing before the Treasury Select Committee.

Currency race that everyone is trying to lose