Forecasts Turn Bearish on British Pound and Euro While Dollar Remains Positive: News Update, Predictions and Commentws

The euro on the other hand continues to suffer weak sentiment and as a result is predicted to be the under-performer of the three currencies in the spotlight here.

At the time of writing the following levels are witnessed:

• The pound dollar exchange rate (GBP to USD) is 0.30 pct down at 1.6835. The GBP has taken a hammering in the Friday session after it was shown UK Manufacturing PMI came in below consensus expectations.
• The pound to euro exchange rate (GBP/EUR) is 0.32 pct lower at 1.2572.
• The euro dollar exchange rate (GBP/EUR) is 0.07 pct lower at 1.3379.

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.

US Dollar (USD) strength forecast to remain intact

Understanding the currency markets and predicting where they are headed will require an understanding of the fundamental point that the USD has hit a sweet spot and is the dominant force at present.

US dollar strength is being keenly felt by the likes of the Australian, New Zealand and Canadian dollars - all of which are likely to see their interest rate yield advantage eroded as the US starts to raise interest rates.

Rates are widely expected to start rising in 2015 thanks to an improving economy.

The dollar and euro are also tipped to decline against the dollar in such an environment. However, the pound dollar rate could be offered some respite as the Bank of England is seen as being the first major central bank to raise rates.

Pound dollar exchange rate (GBP/USD) forecast: Support levels break

The dollar exchange rate complex strengthened to fresh highs after data showed the U.S. economy returned to growth in style in April-June, expanding at a robust annual rate of 4 percent.

That handily beat forecasts of 3 percent and offered evidence of more underlying muscle in the world’s biggest economy.

"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.

The exchange rate will come under close scrutiny on the first trading day of the new month when US Non-Farm payrolls are released.

"With employment data out of the US expected to contribute significantly to the Federal Reserve's decision making, it is likely that further optimism will build if jobless claims figures surpass the level that is currently being anticipated," says Kamil Amin at Caxton FX. "Overall, we expect the rate to continue on the current downward trajectory but remain close to the current support level of 1.69."

Euro pound exchange rate forecast

The euro has edged higher against the pound sterling in recent sessions, however this could be put down to relief buying and month-end portfolio adjustments.

We would like to see the euro consistently close higher on a daily basis before calling time on the pound's dominance.

Concerning the technical outlook for the euro pound exchange rate pairing, analyst Luc Luyet at MIG Bank tells us:

"EUR/GBP remains close to the resistance area defined by the declining channel (around 0.7929) and 0.7940. Another resistance lies at 0.7981 (see also the declining trendline). A break of the initial support at 0.7904 (28/07/2014 low) is  needed to suggest the end of the recent rebound. Another hourly support stands at 0.7874.

"In the longer term, the break of the key support area between 0.8082 (01/01/2013 low) and 0.8065 (05/06/2014 low) opens the way for a full retracement of the rise that started at 0.7755 (23/07/2012 low).

"Another strong support stands at 0.7694 (20/10/2008 low). A break of the resistance at 0.8034 (25/06/2014 high) is needed to suggest some exhaustion in the medium-term selling pressures."

Euro dollar exchange rate forecast: Short-term support, long-term selling

The euro is likely to undergo a bout of strength in the very near term as month-end portfolio flows are expected to be relatively neutral with the exception of against EUR, "where flows are expected to be EUR/USD positive," say Lloyds Bank Research.

Concerning the technical forecasts for the world's most widely traded currency pairing, analysts at Swissquote Research say:

"EUR/USD is in an underlying downtrend. However, monitor the support at 1.3367 implied  by yesterday's intraday bullish reversal (hammer formation). Hourly resistances can be found at 1.3444 (28/07/2014 high) and 1.3485 (24/07/2014 high).

"In the longer term, EUR/USD is in a succession of lower highs and lower lows since May 2014. The downside risk implied by the double-top formation (1.3379) has been met.

"However, another downside risk is given by 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 key resistance lies at 1.3549 (21/07/2014 high)."