Pounds to Dollars Chart 4 Nov 2010

The pounds to dollar pair has finally pulled away from the USD1.60 price level following yesterday’s FED statement ending the forex trading session as a relatively wide spread up candle closing at USD1.6106 and as such holding above the key USD1.6089 price handle.  As such we now have a deep platform of support at this important level which should provide the springboard for a sustained and longer term trend for cable as a result.  This bullish sentiment has spilled over into today’s forex trading session, helped further by the UK fundamental news, which has propelled the currency pair through the USD1.62 price zone to trade at USD1.6264 at time of writing.  The longer term outlook remains firmly bullish now that this breakout has been established and with the 9 day average now crossing above the 14 day average this is adding further weight to our analysis.  Looking ahead the US dollar will continue to decline over the next few weeks as the bond purchase programme gets under way, and should we see a breach of the USD1.6877 high of late 2009 then this could provide a further platform as the trend builds further and on towards the 200 week moving average which currently resides at USD1.75 on the weekly chart.  Tomorrow sees the monthly non farm payroll release which is expected to come in at 63k against last month’s -95k, with Wednesday’s ADP figures suggesting that the employment news may be mildly positive.  The headline unemployment rate is expected to remain flat at 9.6%.

Pound surges as Bank leaves QE unchanged

Pounds to Dollars 20 Oct 2010

An interesting couple of days for the pounds to dollars pair which fell sharply yesterday (along with most other dollar pairs and commodities) as the Chinese interest rate decision rippled across the markets, before bouncing back today, much as expected, following the long awaited spending review programme from the UK government.  The latter appears to have pleased the market as the British Pound recovered sharply to recover all of yesterday’s losses.  From a technical perspective the low of yesterday ran into strong support from the 40 day moving average which provided a solid platform for today’s recovery, and provided this upwards momentum continues tomorrow then expect to see cable to break back above both the 9 and 14 day moving averages in due course and thereafter run onto USD1.60 and beyond once again.  Provided this pattern emerges then we should see a continuation of the recent bullish trend and any clearance at USD1.6107 will further cement this move in place and, from there, we should be begin to penetrate the deep price congestion which runs all the way through to USD1.6876.  The outlook remains bullish for the pounds to dollars pair provided this analysis holds and will be further confirmed once the 200 day moving average starts to turn higher.

Aside from today’s spending review it was relatively quiet for the pair but tomorrow sees the all important retail sales for the UK which are forecast to come in at 0.4% against a previous of -0.5% and should this figure vary wildly (to the downside) then we could see some temporary sterling weakness.  Meanwhile in the US we have the weekly unemployment claims which are expected to remain relatively flat at 454k, coupled with the Philly Fed manufacturing index which is expected to show a significant improvement over last month’s -0.7 to a +2.3.  The week rounds off with the G20 meeting.

Doubts grow on prospects for G20

Pounds to Dollars 18 Oct 2010

An interesting signal on the pounds to dollars pair on the daily chart which ended on Friday as a deep shooting star candle which momentarily breached the USD1.60 price handle before closing back below at the original open of the day and forming a perfect candle as a result.  As such this gave further weight to Thursday’s candle which also exhibited an element of weakness as characterised by the shadow to the upper body, and this duly converted into a temporary pullback with the pounds to dollar pair currently trading at USD1.5871.  The issue now is whether this is a temporary reversal or the start of a longer term change in sentiment and the key is likely to be the 14 day moving average which has already provided interim support to the move lower this morning with a bounce and hold at this point.  Should this indicator subsequently be breached then we could see a deeper pullback to re-test support at the 40 day moving average currently at USD1.5646 where further support awaits.  The move lower today comes as no great surprise following the analysis of the weekly usd index chart which closed on Friday as a long leg doji, suggestive of a reversal of sentiment towards to the US dollar.  However, the longer term remains firmly bullish for the pounds to dollars pair provided we see the platforms of support outlined above coming in play, and as such, today’s pullback may only offer the US dollar temporary respite from its slide lower.

There is no significant fundamental news for either the British Pound or US dollar until tomorrow when we have building permits in the US and a speech from BOE Gov King in the evening, which is followed on Wednesday by the MPC meeting minutes coupled with PSBR data.  Of course, this week is dominated by the Spending Review in the UK when the UK government is expected to lay out its proposals for a reduction in the deficit.

Pounds to Dollars Chart 15 Oct 2010

The pounds to dollars pair continues to climb higher, albeit in a relatively muted manner, with yesterday’s narrow spread up candle exhibiting a degree of weakness as characterised by a deep upper wick to the body of the candle.  However, this has failed to convert into any meaningful pullback in this morning’s early trading, with the pair moving higher once again to trade at time of writing at USD1.6050.  From a technical perspective the key level overnight was the breach of the USD1.5994 price handle which had presented potential resistance to any continuation of the recent bullish trend and provided we hold above this level in today’s forex trading session then this should provide a further level of support to the move higher.  The trend is fully supported by both the 9 and 14 day moving averages, along with the 40 day which is now beginning to slope higher once again, and we now only await a turn in the 200 day for a confirmation of any longer term bullish trend.  As we are now pushing deep into the resistance between USD1.58 and US1.68 to the upside any move higher will need some additional momentum but this is likely to come from the QE2 programme in the US which is due to start in the next couple of weeks, which will no doubt provide the impetus to push cable towards the USD1.6876 and possibly beyond in due course.

The fundamental news today is dominated by a speech from Fed Chairman Bernanke entitled “Monetary Policy Objectives & Tools in a Low Inflation Environment” – never has such a dry subject been so eagerly awaited, although the markets are also waiting for core CPI, core retail sales & the UoM consumer sentiment numbers expected later this afternoon.