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Pounds to Dollars Forex Forecast 6 Oct 2010

pounds to dollars

Pounds to Dollars 6 Oct 2010

Yesterday’s wide spread up candle lifted the pounds to dollars pair once again from its recent sideways trading range in the USD1.58 price region, closing marginally above the USD1.59 price handle, having reached an intra day high of USD1.5930.  As such the pair has created a further step up in the short term bullish trend, as it looks to break above the USD1.60 region in due course, having first re-tested the highs of early August at USD1.5994.  Yesterday’s price action was once again firmly supported by the 9 day moving average with the low of the session at USD1.5750, finding solid support from the 14 day moving average immediately below – both strong trading sessions that the present bullish trend remains firmly in place.  Indeed we have seen this facet of the technical picture repeated today, this time with the 9 day average as the low of the session at USD1.5832 bounced off this indicator before pushing the price back above USD1.59 to trade at time of writing at USD1.5901.  As such the upwards slope for cable continues to hold and provided we see the USD1.60 region breached we are then entering the underside of deep resistance which extends from this point through to USD1.6876.  The depth of any penetration of this area will largely depend on continued weakness in the US dollar rather than strength in the British Pound and given the state of the usd index at present it is the former that is likely to drive cable higher over the short to medium term.

The fundamental picture at present is largely being dictated by the FED and the consequences from its desire to implement QE2 in the face of a stalling of the US economic recovery which was further evidenced today by the ADP data which came in worse than expected at -39k against a forecast of +23k.  Should this be replicated in Friday’s non farm payroll data it may be sufficient to push the usd index down another notch lower with a consequent rise in the pounds to dollars pair.  Between today and Friday we have the weekly unemployment claims in the US which are likely to be overshadowed by the nfp data and, in addition tomorrow, we have a UK rate statement from the Bank of England.  Rates are expected to remain on hold and as such are unlikely to cause any violent reaction in the sterling pairs.

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