Pound Dollar Daily Chart - 6th March 2009

Pound Dollar Daily Chart - 6th March 2009

There is little I can say about cable, that I haven’t said before in the last few weeks, with much the same trend in place as on the euro dollar ( if you can all it a trend!), with the pair consolidating and trying to re base around the 1.4000 level. The candle of yesterday failed to penetrate any of the moving averages, bouncing off the 9 day before closing with a down doji. This morning has seen prices rise in much the same way as for the euro dollar, and from a correlation perspective these two pairs now seemed to have moved back into a closer relationship, following a long period of disconnect. In the last few years the correlation has been extremely close at 0.9 and above, and I believe we are now starting to see this relationship re-established once again, with both moving in a falling wedge pattern, ever so slowly lower! With few signals in either the daily or weekly chart, this is another currency pair that needs a wait and see approach at the moment.

The prevailing theme at the moment, throughout the currency world, is in deciding which is the best of the worst! With so much bad news around, and so many countries in dire economic shape, it is often a question for traders and investors of picking the least worst performers for the future, and indeed some may be starting to see the UK pound as a buy at the moment, simply because it may be the best of a bad bunch! These are tough times, and trading is extremely difficult at present, given the unique and grim economic picture, which is uncharted territory for a world in turmoil. With very few of the world’s leaders having much of clue, but happy to throw ever increasing and mind-boggling sums at the problem in a forlorn hope that something positive will happen soon, we as traders are left to try to analyse the market conditions, an almost impossible task at present. With so much bad economic news around, many currencies are simply in idle mode, with no clear idea of where to go or what is likely to happen next. Like the euro dollar, the pound dollar is extremely unstable at the moment with indecision in the monthly charts in the form of doji candles. I cannot make the point too strongly, that the behaviour of currency ( and indeed other markets) is not normal at present, since the economic picture is extreme and abnormal. The fallout from this gloomy picture is that whether we use technical or fundamental analysis, or both, the charting compass is at best faulty, and at worst broken, so any trading decisions we take will have to be based on sound solid risk and reward potential, like never before. This is not the time for speculative trades, or intuitive trades. The market is unstable and illogical at present and likely to remain that way for some time to come. To check on the latest live news and live currency charts just follow the links.

The short term outlook is sideways, the medium to long term is sideways with bearish tone.