Pounds to Dollars Chart 20 July 2010

The failure of cable to breach the USD1.5472 price point both on Thursday and Friday last week now appears to be gaining increasingly significance as a potential turning point from the recent rally of early May.  Yesterday’s narrow spread down bar further confirmed this potential signal with this morning’s price action in the London forex trading session reinforcing this view once again with an attempt to rally promptly quashed and the pair trading below both the 9 and 14 day moving averages at the time of writing.  The price area outlined above was the same as that which prompted a reversal lower in mid April sending the pair sharply down and eventually reaching a low of USD1.4227.  For this reversal to be confirmed we need to see a break and hold below USD1.4873 which will also coincide with penetration and a breach of the 40 day moving average.  Should these factors combine then expect to see cable pull back sharply and a re-test of USD1.4237 would then be increasingly likely.

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Sterling falls on wider than expected budget deficit

Pounds to Dollars Chart 13 July 2010

The pounds to dollars pair continues to cling on at the USD1.50 price region as the daily begins to look increasingly weak, but clearly not yet ready to capitulate. Yesterday’s price action, whilst ending the trading session marginally lower, still evidenced a lingering bullish sentiment, indicated by the depth of the lower wick to the body of the candle.  This has translated into a modest rally in the London trading session but the pair has once again run into resistance from both the 9 and 14 day moving averages which are gradually beginning to exert their influence on the short term trend.  Should this continue in the next few days then expect to see cable break lower, first to re-test support at the 40 day moving average which currently sits at USD1.48, and thereafter to re-test the lows of mid May at USD1.4227 and beyond.

UK recession worse than at first thought