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With the high drama and emotion surrounding the Scottish Referendum now over, the British Pound too has recovered a measure of stability, particularly against the US dollar following its dramatic gap down the weekend of the rogue poll which suggested a win for Alex Salmond and the yes campaign.
Since that weekend cable has managed to manage to fill the gap down to touch a high of 1.6524 before resuming its slide lower, although it has yet to touch the low of early September in the 1.6051 region, which also corresponds with a major price support line on the monthly chart.. This recent price action also puts cable firmly below the 200 moving average on this chart.
With the market now expecting a rise in interest rates as early as Q1 2015, the question is whether this support platform will provide the springboard for cable to higher, or is merely the start of a further sell off. The candles on the daily chart favour a continuation of the current bearish tone, but Tuesday’s doji candle on high volume suggests a possible pause and minor reversal. As always we must also look to the US dollar which continues to remain strong and which is adding its own pressure.
Meanwhile, against the euro the pound has seen some dramatic gains with the eurgbp falling to a low of 0.7766, a price region not seen since July 2012. In this case it is more a question of the euro weakness rather than pound strength driving this pair at present. Should the 0.7766 level be breached then we could even see a deeper move towards the 0.7246 region where on the monthly chart the 200 moving average awaits along with a further developed platform of support.
