Pounds to Dollars 13 Oct 2010

The pounds to dollars pair once again appears exhausted as it approaches the USD1.6000 price handle, repeating the pattern that we saw back in early August, which saw the pair retrench to test the USD1.53 price region before recovering.  Whether this pattern is repeated once gain, only time will tell, however, last Thursday’s deep up thrust candle which touched a high of USD1.6018 has given us a possible early warning signal that the present price action is running out of steam.  We saw further evidence of this yesterday on the daily chart with a break and hold below both the 9 and 14 day moving averages.  In today’s forex trading an attempt to rise appears, once again, to have run into resistance from the short term moving averages now immediately above and for the time being we can expect to see a further period of sideways consolidation at this level.  Moreover, it is interesting to note that the 200 day moving average is slanting to the downside also suggesting that the current move is exhausted.  For any continuation of the upwards rally we need to see a break and hold well above the USD1.60 level which would then provide the requisite platform of support for the next leg up in the move.  The irony, of course, from a fundamental perspective is that we are expecting a period of sustained US dollar weakness while the markets wait for the FED to implement the next round of quantitative easing – QE2 – and as such would lead to cable rising but this is far from certain at present.

As in the US the employment picture for the UK remains weak with today’s claimant count coming in at 5.3k against a forecast of 4.3k and a previous of 3.8k. The only other significant item of fundamental news for the UK this week will be the inflation report hearing before the Treasury Select Committee.

Currency race that everyone is trying to lose

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.

IMF chief warns on exchange rate wars

Pounds to Dollars 4 Oct 2010

The pounds to dollars pair moved higher in forex trading on Friday, closing as a relatively narrow up candle ending the week of largely sideways consolidation, with the pair confined to a narrow range between USD1.57 and USD1.59.  It is interesting to note, however, that throughout the week the 9 day moving average remained relatively unchallenged and indeed on Thursday and Friday provided a support platform, coupled with the 14 day average, together supporting the lows of each day on the daily chart.  As such, whilst the move appears to be struggling at this level the support being offered by the short term moving averages suggests that we may be preparing for a further leg up in the recent rally with a possible move higher to test the USD1.5998 high of early August, and this would certainly be the case should the US continue to decline as FED monetary policy becomes a reality.  Any break and hold above this price level would then open the way for a possible run towards USD1.6458 where further resistance awaits.  To counterbalance this analysis the longer term moving averages on the daily chart, that is the 40 and 200 day, are just starting to flatten and even slant lower which would suggest market exhaustion at this price level.

The fundamental news likely to impact the pounds to dollars pair is not due for release until the back end of this week when we have an interest rate decision in the UK and non farm payroll in the US.

Dollar still not looking oversold

Pounds to Dollars 30 Sep 2010

The pounds to dollars pair paused yesterday, taking yet another breather in the USD1.58 price region, before pushing higher once again in this morning’s early trading as the US dollar continues to come into sustained pressure once again as evidenced in the usd index daily chart.  The technical picture for cable still remains firmly bullish with the 9 day moving average in particular offering strong support to any re-test to the downside as evidenced in both Tuesday’s and Wednesday’s forex trading sessions.  Below this the 14 day average is also providing an excellent platform of support and now having crossed above the 40 day average, is giving us a further bullish signal.  With cable now trading well above all four moving averages the key target in the short term is the high of early August which saw the pair touch USD1.5994 before pulling back to trade sideways for most of September.  For any continuation of this current rally we need to see a break and hold above this level, at which point we then begin to run into deep and consistent price congestion created throughout much of 2009 which sits between USD1.60 and USD1.67.  Ultimately, this region could present an insurmountable barrier to any further move higher and will indeed require some sustained momentum to breach.  Provided the US dollar continues its progress lower, which seems likely at present, both from a technical and fundamental perspective, then we may see this breached in due course.

This morning’s fundamental news for the UK was the release of the Nationwide HPI data which provided a small lift, coming in marginally better than expected, at 0.1% against a forecast of -0.3%.  This afternoon sees the unemployment data for the US which is forecast to show a modest fall from 465k to 458k this time around.

Pounds to Dollars 29 Sep 2010

The pounds to dollars pair struggled yesterday following last Friday’s strong surge higher as the market took a breather at the USD1.58 price handle.  Indeed yesterday’s long leg doji candle which oscillated between USD1.5895 to the upside and USD1.5718 to the downside suggests that we could be seeing a short term turning point for cable as the recent rally runs out of steam in an indecisive market.  It is interesting to note that in the current fundamental environment the pounds to dollars pair appears to one of the few that is failing to benefit from the continued weakness in the US dollar.  Indeed in today’s forex trading we have seen a similar picture once again with the pair oscillating around the USD1.58 price point.  Whilst the short term outlook remains bullish with both the 9 and 14 day averages having crossed above the 40 day, the medium to longer term may seen a turn lower in due course as the pair test the USD1.5998 high of late June which may signal the end of the current upwards move.

With no tier one fundamental news for either sterling or the US today the market will look at tomorrow’s HPI housing data in the UK and the unemployment claims in the US which are forecast to come in at 458k, marginally lower than last week’s 465k.  The only item of news for tomorrow are 2 speeches from Fed Chairman Bernanke who is due to testify before the Senate Banking Committee followed by a speech at the Federal Reserve – a “town hall meeting” with educators in Washington.  We will have to wait and see whether he gives the market any clues as to whether the FED is likely to resume its QE2 programme.

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