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British Pound - US Dollar Technical and Fundamental Forex Forecast for May

British Pound - US Dollar Technical and Fundamental Forex Forecast for May

2011-05-12 00:21:00
Joel Kruger, David Rodriguez,
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British Pound/US Dollar Monthly Technical Forecast

5/11/2011 Weekly Chart

british_pound_us_dollar_technical_fundamental_forecast_body_gbp.png, British Pound - US Dollar Technical and Fundamental Forex Forecast for May

Prepared by Joel Kruger

The market has been in rally mode for much of 2011 thus far but is finally starting to find some offers ahead of critical medium-term resistance in the 1.7000 area. Look for the latest bearish reversal week to act as the catalyst for deeper setbacks ahead with weakness now seen back below 1.6000 and towards 1.5500 over the coming weeks. Ultimately, only back above 1.6750 gives reason for concern.

British Pound / US Dollar Interest Rate Forecast

Currency, Central Bank

British Pound,Bank of England

US Dollar, US Federal Reserve

Net GBPUSD Spread

Signal

1-Year Expectations(Basis Points)

43

32

12

Bullish

Yield in 1 Year(Percent)

0.93

0.57

0.37

Bullish

british_pound_us_dollar_technical_fundamental_forecast_body_Picture_4.png, British Pound - US Dollar Technical and Fundamental Forex Forecast for May

Bank of England interest rate expectations have fallen to their lowest levels year-to-date, hurting the British Pound’s stance against key currency counterparts. It is nonetheless interesting to note that the GBPUSD has actually rallied despite the deterioration in BoE forecasts. US Federal Reserve interest rate expectations have similarly languished, and prospects point to relatively compressed GBPUSD spreads through the foreseeable future.

Overnight Index Swaps point to higher UK interest rates through the coming 12 months. UK inflation remains well-above the Bank of England’s target of 2.0 percent. Yet we will need to see the hawkish camp gain traction in the BoE’s Monetary Policy Committee. Those same OIS point to an August interest rate hike. Any indications that the hike could come sooner or later could force important moves in GBP pairs.

Written by David Rodriguez, Quantitative Strategist and Joel Kruger, Technical Strategist for http://www.DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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