FX Forecasts: GBP/USD Rate Weakness and Euro Dollar Rate Downtrend to Continue

Technical indicators rely on a host of observations made on exchange rate charts; by observing recent price action analysts are able to derive a strong idea of where rates are headed.

Euro Dollar Exchange Rate Forecast: More Losses

• The euro to dollar exchange rate (EUR/USD) is currently quoted as being 0.05 higher than it was at Wednesday night's close and is at 1.3372.

Swissquote Research note that the euro dollar rate is looking week and the downtrend, in place since May 2014, is likely to persist however a rebound in the short-term is possible:

"EURUSD continues to hold at the lows. The proximity of the key support at 1.3296, a short-term rebound is likely.

"Resistances can be found at 1.3444 and 1.3503 (05/06/2014 low). An hourly support stands at 1.3333 (06/08/2014 low).

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

Be aware that these are mid-market quotes and they will attract a discretionary spread from your bank. Hence the rate you see is not the rate you get.

However, an independent FX provider will seek to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Find out more here.

Pound Dollar Exchange Rate Forecast: Resistance Must be Broken for Long-Term Rally to Resume

• The pound to dollar exchange rate (GBP/USD) is 0.03 pct lower having reached 1.6682.
• Expect the near-term to be challenging following the Bank of England Inflation Report which has pushed back the chance of an early UK interest rate rise.

On the technical forecasting front, Swissquote note that the longer-term outlook remains constructive for GBP, provided some key resistance points are broken.:

"GBPUSD remains weak, as can be seen by the continued development of new lows (1.6775 intraday). Bullish rallies quickly lose momentum.

"A break of the resistance at 1.6893 (01/08/2014 high) is needed to suggest exhaustion in short-term selling pressures. Another resistance can be found at 1.6955 (30/07/2014 high). In the longer term, the break of the major resistance at 1.7043 (05/08/2009 high) calls for further strength.

"Resistances can be found at 1.7332 (see the 50% retracement of the 2008 decline) and 1.7447 (11/09/2008 low). A key support stands at 1.6693 (29/05/2014 low, see also the 200 day moving average)."

Sean Lee at ForexTell says he will be looking to buy the pair on dips:

"The GBP looks a bit suspect overall on some of the crosses so I wouldn’t be getting carried away with bullish strategies just yet.

"That said, the cable up-trend is very strong and we will see sharp bullish retracements from time to time whilst these medium term consolidation phases are on going.

"I’m looking to buy intraday dips now towards 1.6770, keeping stops fairly tight and looking for a re-test of 1.6900 before the week is out."

Euro to Pound Exchange Rate Forecast: Relief for EUR/GBP

The euro to pound sterling exchange rate (EUR/GBP) is trading 0.08 pct higher at 0.8016.

According to Swissquote the declines in the euro to sterling rate could be easing:

"EUR/GBP is trying to form a short-term base. Monitor the resistance at 0.7981, as a clear break would validate a short-term bullish head and shoulders. Hourly supports can be found at 0.7904 (28/07/2014 low) and 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."

The Dollar Could Be About to Suffer a Setback

It will it take the cracking of the above-mentioned resistance levels for the pound dollar rate to reassert its 2014 rally.

Interesting views then from Bank of America Merrill Lynch's MacNeil Curry who sees the potential for a USD setback:

"US $ to correct as risk recovers. Look to buy the US $ dip. With equities and treasuries correcting, the US $ should also suffer a corrective setback.

"Indeed the US $ Index is showing signs of near term stalling, especially against emerging market and commodity currencies. However, pullbacks must be seen as corrective.

"Beyond the short term swings, we remain bearish and short €/$ for 1.3212 ahead of 1.3104 and below. In the week ahead we will look to buy the US $ on a pullback, ideally against the NZD and INR. NZD/$ in a medium, if not long term bear trend targeting the 0.812/0.8067 zone, while $/INR targets 62.46 ahead of 62.98 and potentially beyond."