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Pounds to Dollars Forex Forecast 20 Oct 2010

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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