Exchange rate forecasts: Pound sterling setbacks to be shallow, USD weakness ahead, JPY strength, EUR mixed

Modified: Monday, 10 March 2014 22:07 GMT
Written by: Gary Howes

Pound Sterling Live compile a selection of short to medium term exchange rate forecasts on a daily basis.

Exchange rate markets have witnessed a spike in volatility over the course of the past two trading days.

This volatility is forecasted to continue to be a feature as long as worries over Asian growth remains elevated in the minds of investors.

Today’s events, including the release of US Home sales and German business climate data will be watched.

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Pound dollar exchange rate forecast (GBP/USD)

"Having posted a new high on Friday reinforcing the bullish picture, any setback will be limited to support at 1.6447 ahead of 1.6310. Resistance is at 1.6747, a break above which would open 1.7043." - UBS.

MIG Bank:

"GBP/USD declined sharply last Friday, negating the positive implications of the recent new highs. Supports stand at 1.6451 (22/01/2014 low) and 1.6396 (20/01/2014 low). A resistance now lies at 1.6668 (24/01/2014 high)."

"The break of the major resistance area between 1.6381 and 1.6466 favours a further long-term rise towards the major resistance at 1.7043 (05/08/2009 high). Given the overall overbought conditions, a break of this level is unlikely in the next weeks. A key support stands at 1.6305 (25/12/2014 low)."

Euro pound exchange rate forecast (EUR/GBP)

"The important resistance is at 0.8349. While this holds, the cross remains vulnerable to extend its bearish trend to test support at 0.8160. A close below which would be the next bearish development." - UBS.

MIG Bank:

EUR/GBP continues to improve after Thursday's bullish engulfing pattern. The hourly resistance at 0.8264 has been broken and the steeper declining trendline is challenged. Another resistance stands at 0.8350. Hourly supports can now be found at 0.8248 (23/01/2014 high) and 0.8210 (24/01/2014 low).

"In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high). Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."

Euro dollar exchange rate forecast (EUR/USD)

"Despite the recent sharp recovery, the MACD is still below its zero line which is a bearish condition. Only a close above resistance at 1.3746 would extend the strength. Support is at 1.3596 ahead of 1.3508." - UBS.

MIG Bank:

"EUR/USD made an intraday bearish reversal last Friday near the resistance at 1.3699, which favours short-term caution. Hourly supports stand at 1.3625 (intraday low) and 1.3583 (22/01/2014 high). Resistances can now be found at 1.3739 (24/01/2014 high) and 1.3819 (30/12/2013 high).

"In the longer term, the recent false breakout near the key resistance area defined by 1.3811 (11/12/2013 high) and the long-term declining trendline (around 1.3890) suggest a limited upside potential. We favour a gradual corrective phase towards the 200 day moving average (around 1.3360)."

Australian dollar, US dollar forecast (AUD/USD)

"The pair posted a new low suggesting more downside in the near-term to break through support at 0.8545 and then extend to critical 0.8067. Resistance is at 0.8888." - UBS.

MIG Bank:

"AUD/USD made new lows on Friday, confirming a persistent bearish trend. The technical structure is negative as long as prices remain below the resistance at 0.8888 (22/01/2014 high). An initial resistance lies at 0.8775 (24/01/2014 high). An hourly support can now be found at 0.8660.

"The long-term technical pattern remains negative and favours a further decline towards the key support at 0.8067 (25/05/2010 low). A support can be found at 0.8316 (01/07/2010 low). A significant resistance can be found at 0.9168 (02/12/2013 high)."

Dollar yen forecast (USD/JPY)

MIG Bank:

"USD/JPY extended its losses on Friday, breaking the supports at 102.86 and 102.50. Monitor the bounce attempt near the support at 101.53. Hourly resistances now stand at 102.98 (23/01/2014 low) and 103.59 (24/01/2014 low).

"The failure to break the resistance at 105.50 (61.8% retracement of the decline that started in
June 2007) coupled with general overbought conditions favours a corrective phase towards the support at 101.63. A strong support lies at 99.57 (19/11/2013 low, see also the 200 day moving average), while a major resistance stands at 110.66 (15/08/2008 high)."