Exchange Rate Forecasts: Pound Dollar Could Fall Further, Euro Pound in Tight Range, Euro Dollar Outlook Deteriorates Further

We consult a number of currency specialists in orderd to understand where the major pairs could be headed next based on a variety of technical indicators.

For reference, at the time of publication the current spot market rates are on offer:

• The pound to euro: 0.02 pct lower on a daily basis at 1.2614.
• The pound to dollar: 0.02 pct lower at 1.6882.
• The euro to dollar: 0.04 pct lower at 1.3386.

Please note that the above quotes are taken from the wholesale markets; your bank will affix a spread to the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Find out more.

Pound Dollar Forecast: Support breaks

The pound dollar rate has broken through the 1.7 area of support and now appears to have made a strong go at falling through 1.69. 

Whether a rebound above 1.69 can be executed today will determine the near-term outlook, the bulls will want to see some kind of fightback.

"GBP/USD traded briefly below 1.69 yesterday, the first time since Governor Carney’s Mansion House speech. The dip lower was mainly due to a firmer USD tone following some strong data. GBP/USD has been on a downtrend since the start of the month. It's difficult to go against the trend. But GBP/USD may see some respite today," say Lloyds Bank Research.

Regarding the key levels dictating the outlook, Blackwell Global tell us the return to strength should not yet be ruled out:

"The price appears to have touched the trend line at the end of last week and found support at the 1.6958 mark. Once the resistance is broken above the 1.7000 mark, we should see a relatively quick movement up to previous levels and to even test the five year high recently posted.

"Traders could look to enter once this resistance is broken, with a stop loss below the trend line, in case there is a breakout lower. Several targets can be chosen for a movement higher, with previous resistance at 1.7060 being the first. The previous five year high at 1.7190 will also be a likely target.

Euro pound exchange rate forecast: EUR/GBP strengthens, but for how long?

The euro pound rate has trade higher in the final session of the month with many commentators pointing out that month-end flows are favourable to the shared currency.

Thus we would approach this pair with caution and reassess the lie of the land once the new month starts.

The longer term picture does ultimately favour the GBP, as noted by Piet Lammens at KBC Markets:

"Recently, EUR/GBP stayed near the cycle lows and it even set a minor new low earlier last week. The UK news has been a bit more mixed recently, but the damage on sterling remained contained.

"Short-term, there is room for some consolidation of sterling against the euro. Even so, overall euro weakness may hamper a substantial rebound of sterling against the euro. So, there is no reason to go against the trend.

"We maintain our LT bullish view on sterling with EUR/GBP 0.7755 as a target. However, to set-up new long sterling positions we maintain a sell-on-upticks tactic for EUR/GBP."

Euro dollar forecast: Key support broken, downside risks ahead

The dollar is the currency to beat at present and now the oft-stubborn euro is beginning to suffer a technical breakdown.

Luc Luyet at Swissquote Research says:

"EUR/USD has broken the key support area defined by 1.3503 (see also the long-term rising trendline from the July 2012 low) and 1.3477 (03/02/2014 low), confirming an underlying
downtrend. The bounce is thus far unimpressive, as prices remain near their recent lows. Hourly resistances can be found at 1.3485 (24/07/2014 high) and 1.3513 (21/07/2014 low).

"In the longer term, EUR/USD is in a succession of lower highs and lower lows since May 2014.

"Downside risks are given by 1.3379 (implied by the double-top formation) and 1.3210 (second leg lower after the rebound from 1.3503 to 1.3700). A strong support stands at 1.3296 (07/11/2013 low). A resistance lies at 1.3549 (21/07/2014 high)."