An interesting article in the FT suggesting that the forex market’s current love affair with sterling may be overdone prompted me to look at bit more closely at the British Pound and, in particular, the Pound Dollar pair daily chart. Since the 7th January we have seen a remarkable recovery with the pair climbing from a low of USD1.5406 to hit a high earlier this week of USD1.6059 before pulling back to close yesterday at USD1.5972. Indeed yesterday’s yesterday’s shooting star candle was also an inside day, giving us a strong signal that the rally may now be running out of steam and coupled with the previous day’s deep shooting star candle these are both bearish signals. Furthermore, in today’s price action (although at an early stage) it looks as though we could be looking at a hanging man candle which would further confirm the oversold nature of sterling at present. However, as always we must be patient and wait for market sentiment to confirm and for the chart to speak to us.
Today’s fundamental news for sterling has included the CBI Diffusion Index which has just come in much worse at -16 against a forecast of -1.