Pounds To Dollars - GBP/USD Daily Candle Chart 5th June 2009

Yesterday’s wide spread down bar for the dollars to pounds pair, closed the session marginally below the 9 day moving average, and confirming the bearish engulfing signal of Wednesday, which could an indication that the current rally has run out of steam, a view which will undoubtedly be confirmed in the weekly chart at the close of the trading session this evening. I will look at this in more detail on Monday, but suffice to say we will see a chart with a strong rally, followed by a clear and well defined shooting star sitting at the top of a series of up bars, a clear sign that a reversal may now take place if the signal is confirmed in the next few weeks. It is also interesting to note on the daily chart, that all three of the last three daily candles (including that of today) have made an attempt to rise, only to be pressured with sell orders in the market, driving the daily price lower as a result, once again suggesting that there is weakness in the currency pair, and possibly due for a significant reversal in due course. This analysis will only be confirmed once we have seem prices break and hold below all three moving averages, and certainly once they are well below the previous high of the rally at 1.5860.

On the fundamental news front, the release of the Non Farm Payroll figures provided a mixed picture for currency traders and the broader markets, with the headline number coming in much better than expected at -345,000, well below the forecast at -520,000, but with the unemployment rate surging to a 26 year high of 9.4%, with a total of 14.5 million people now unemployed, a figure that has practically doubled since the start of the recession in 2007. The picture for UK sterling is also complicated by the uncertainty surrounding the UK Government which is in meltdown following a disastrous set of local election results and a string of high profile departures from the cabinet. As Jerry Springer said on a UK TV show last night ” every politician has a contract with the people who elect them – Gordon Brown has no such contract as he has never been chosen by the people” – it’s a pity we don’t have the US electoral system here in the UK but I digress! My suggestion for trading the dollars to pounds pair, certainly for trading the longer term trends, is to wait until next week and a study of the weekly and monthly charts which may well provide some revealing insights.

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