British Pound Weakens Ahead of Interest Rate Cut

Currencies / British Pound Nov 06, 2008 - 05:27 AM GMT

Sterling weakened from yesterdays level of £/$1.61 trading down to £/$1.59 ahead of today's anticipated rate cut which earlier analysis suggested could be as much as 1%. However the Pound is extremely oversold following its 25% crash from the high of £/$2.11 all the way to £/$1.53, this suggests that even a 1% cut would result in limited downside action until sterling has managed to work out its oversold state.

Chart courtesy of stockcharts.com

Immediate short-term support levels are at £/$ 1.57 and £/$ 1.56. Immediate trend objectives are for a corrective rally to above £/$1.70 , to be followed by a downside test of £/$1.53 on break of which Sterling would target the longer term objective of £/$1.37

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By Nadeem Walayat
http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

Dr Khan
17 Nov 08, 04:44

Do you still expect a rebound to £/$1.70 (or less) before a downside trend to £/$1.37

Based on your article of 6 Nov, specifically the "immediate trend objectives are for a corrective rally to above £/$1.70" Admittedly this is prior to 1.5% rate cut but do you still hold the view we are due for a rebound from where we are before we "target the longer term objective of £/$1.37"

JP recent report indicates trending to low's of £/$1.28.

Should we expect a technical correction to 1.60's before sterling plunges downwards?

Cheers

Nadeem_Walayat
17 Nov 08, 09:07

British Pound Oversold

The British Pound has been extremely oversold for 2 weeks now and the direct reason is the panic 1.5% rate cut that no one could have forseen, the consensus was forecasting a 0.5% cut, my forecast was for a 1% cut.

The Pound should rally towards £/$ 1.60 to unwind the extreme oversold state into the end of November, i.e. I expect to Pound to be higher at the end of November than where it is today targetting £/$1.60 with the upper resistance at £/$ 1.65.

Offcourse in the meantime should the government announce another panic measure then that would hit sterling again.

£/$ 1.37 is the longer term objective, and represents multi-decade support below which lies parity to the dollar, as the article of 13th Nov covered.

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