GBP to USD Exchange Rate Projections: 1.54 And Then 1.56 Further Out
The pound has entered a corrective bounce against the US dollar after a long period of declines - how far can the rally extend?
As we look forward to the new trading week, many investors are wondering if the U.S. dollar will continue to decline.
Over the past week, the greenback lost value against every major currency with the exception of the Japanese Yen.
The GBPUSD rose against the greenback and the latest move has taken the currency pair above its 9 day long consolidation range.
“The bullish GBP/USD technical pattern (see chart below) that we noted and put on a trade on 5th Oct’s issue is happening as planned and we look to take profit on the GBP/USD risk reversal around 1.5400/50, realising a possible profit of 1.00%-1.40%,” says Peter Chia, FX Strategist with UOB Group in Singapore.
Kathy Lien at BK Asset Management is meanwhile backing a more extensive recovery noting that the British pound is in the midst of what could be a very significant turn for the currency.
“In fact, this year every single major reversal in GBP/USD has been a minimum of 500 pips and the sample size of 11 big moves is not small,” says Lien.
This suggests that from the bottom of 1.5110, GBP/USD could rise as high as 1.5610.
Bank of England Sparks GBP Weakness, Scotiabank See Opportunity to Sell
The rally in the pound to dollar exchange rate has however slowed somewhat with sterling being seen flat following the BoE monetary policy announcement.
As expected, the BoE left monetary policy settings unchanged this month.
But the BoE minutes suggested that the near-term outlook for inflation was a little lower and remarked on the dampening effect of the GBP on CPI – modest negatives for the GBP.
GBPUSD has risen through the early part of this month but the broader trend has been oriented slightly lower since the middle of the year, denoted by a succession of lower lows and lower highs.
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3344▲ + 0.14%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2891 - 1.2944 |
**Independent Specialist | 1.3157 - 1.3211 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Accordingly, analyst Shaun Osborne with Scotiabank tells us he now sees the chance to sell the GBP/USD exchange rate at current levels:
“October’s rally has taken the GBP back to, or a little above, the 200 - day MA (1.5321).
“The broader trend being lower and the 200 - day MA showing signs of holding GBP gains intraday, we think risk/reward favours selling GBPUSD now with stops place above the overnight high.”
IG: US Dollar Weakness Could Extend From Here
GBP/USD took another leg higher overnight when the greenback came under pressure following the release of the US Fed minutes from their most recent policy meeting.
Essentially there remains a degree of doubt as to whether the Fed will raise interest rates in 2015.
The US Dollar Basket has been selling off throughout October.
"There is clearly the potential for further downside given the size of the previous selloffs down to $92.75 and $94.20. However, the long lower shadow on yesterday’s lowest candle shows clear support existing in this area, which marks the convergence of the ascending trendline and 61.8% Fibonacci retracement," says Joshua Mahony Market Analyst with IG in London.
Mahony notes the existence of "very small indecision candles" which confirm a hesitancy and he therefore awaits a break below $95.23 to gain confidence of a further move lower.
