Pounds To Dollars (GBP/USD) - Daily Candle Chart 4th February 2009

Pounds To Dollars (GBP/USD) - Daily Candle Chart 4th February 2009

As you can see from today’s chart for the pound dollar currency pair, I have added two lines which provide a better picture of the current trend. Following yesterday’s up candle, which provided a bullish engulfing signal, this would suggest  a move higher for the gbp usd pair, but looking at the chart, this is far from clear. First we have a strong resistance area at 1.4500 which as I have said many times before, will need to be penetrated and then provide support for an upwards move, if this is to be considered significant. Secondly, as you can clearly see, since the turn of the year, the currency pair have consolidated, both moving sideways, but also forming a pennant, with lower highs and higher lows on a daily basis. This is a precursor to a breakout, and will be combined with extreme volatility when it occurs. If the breakout is to the upside then expect to see prices through the resistance outlined above, and if to the downside, then a retest of support at 1.3500 would not be a surprise. My suggestion for today, and until we have a clearer picture is to stay out of this pair for the time being. With the moving averages crossing back and forth, we need to wait for some clear signals before entering new positions.

On the fundamental front we have three main sets of figures out in the US this afternoon and more details can be found on the euro to dollar site. In the UK this morning we have already had the release of the PMI figures and follow on the back of the European equivalent released 30 minutes earlier. The forecast was for 40.3, with an actual of 42.4 . This is a leading indicator of the economic picture, as it polls purchasing managers with questions on current orders, cost of materials, and employment levels, so gives an early warning to any pick up or down turn in the broad economy. In general if the forecast is beaten then this is generally good for the currency, but remember that tomorrow we have the UK interest rate decision, so any news beforehand is likely to have little impact. In fact the UK pound has virtually no reaction to the news, and everyone is now waiting for this afternoon and tomorrow mornings key figures.