Is the Pound Sterling Overbought and Exhausted? Latest Pound Dollar Exchange Rate Viewpoint
The question is whether the pound sterling has now run out of steam against the US dollar?
Today we see the pound vs US dollar exchange rate unchanged on last night's closing rate. GBP/USD is at 1.6228.
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Pound overbought and looking tired vs US dollar
The pound sterling hasn't been able to capitalise on today's Services PMI beat.
Luc Luyet at MIG Bank says the momentum behind GBP could be weakening:
"GBP/USD is in a short-term rising trend, whose support is at 1.6129 (see also the short-term rising trendline). However, the recent inability to move higher than Tuesday's high suggests a potential weakening short-term momentum."
"In the longer term, prices are close to the strong resistance area between 1.6302 (30/04/2012 high) and 1.6381 (see also the long- term declining trendlines). Given the increasing overbought conditions, we would be medium- term cautious on GBP/USD, as it has already priced in a lot of positive news."
Sterling dollar rate at a cross roads
There are however those that continue to back further GBP/USD gains saying that the current inability by sterling to move higher is merely an example of consolidation.
"GBPUSD has shifted into a consolidation phase after reaching 1.6270 high but we expect the pause to be brief. With GBPUSD comfortably in an expanded uptrend channel , clearance of 1.6179 resistance, thin supply zones above and momentum indicators in bullish territory we remain bullish," says Ipek Ozkardeskaya at Swissquote Research.
Either way, these are key levels for the pound vs dollar.
As Joshua Mahony at Alpari UK notes:
"The GBPUSD pair has seen some volatility this morning after the UK services PMI fell marginally to 60.3. The resulting price action has brought us to a key crossroads, where the direction of the pair is likely to be determined.
"The 15 minute chart shows that the breakout below the key ascending trend-line failed to hold as some feared the PMI figure was likely to be lower than was released following poor manufacturing and construction figures this week.
"The pair is set to break out of this current triangle one way or another and with it could point to a direction for the markets. A break to the downside seems more likely given this pair is majorly overbought on the daily time-frame."
