pounds to dollars daily candle chart

Cable - Daily Chart Analysis GBP/USD 10th Feb 2010

The daily chart for the pounds to dollars pair remains firmly bearish despite yesterday’s modest rally which saw Cable closing the trading session with a relatively wide spread up candle, but with a small wick to the upper body. This mild reversal was much as expected given the small doji cross candle of Monday, and yesterday’s trading provided excellent opportunities to sell into the rally for longer term short positions. The move higher was largely triggered by an expectation that Germany or the IMF would step in with a bailout package to rescue the Greek economy which is now in tatters and likley to cause further volatile moves across all markets as the picture unfolds. This is just the start of yet another twist to the long running financial crisis which now threatens to envelop the euro as it comes under heavy selling pressure once again.

Technically yesterday’s candle failed to breach the 9 day moving average, and in early trading this morning, we have seem this price action replicated once again as the pounds to dollar pair move lower once again. This morning’s fall has largely been triggerred by fears that the UK economy is heading for a double dip recession deepened following the release of the latest retail sales data which recorded the worst January sales growth in 15 years. Retail sales fell 0.7% on a like for like basis from January 2009, which had seen sales rise 1.1%. This afternoon sees the release of the Trade Balance figures in the US, which are forecast at -35.8B against a previous of -36.8. A positive number indicates that more goods were exported than imported and if the data is better than expected then this should be good news for the US dollar which will put further pressure on the UK pound.

My short term target for the pounds to dollars pair is 1.55, and if this level is breached then we should see a much deeper move longer term towards 1.50 and below.

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