Back to the 90's: Pound Dollar Rate (GBP/USD) Following Similar Trading Patterns to Last Decade Say Citi

Sterling has certainly seen its bullish run come to a close; those expecting a return to the best exchange rates of 2014 could be waiting a while yet.

Indeed, at test of the 1.50's could happen.

For your reference, the British pound to dollar exchange rate (GBP/USD) is seen at 1.6572 at the long-weekend.

Note that those waiting for better exchange rates should not hesistate, on Tuesday it is worth ensuring your FX provider has the relevant buy order in place for when your rate is achieved. Likewise, if there is a threshold you are not willing to cross to the downside ensure stop-loss orders are in place. Please learn more here.

What the 1990's Could Teach Us About Sterling Dollar

As the USD continues its climb againt the G10 majors in anticipation of Federal Reserve tightening, CitiFX have taken a look at their longer-dated forecasts.

Indeed, regarding Cable analysts note the overall price action is still very similar to that seen throughout the 1990’s:

"Recently we have turned from 1.7192, similar to the turn seen in 1998 from a high of 1.7178. What happened next was a fall to 1.5939 over 4 months before consolidating (and then we went lower still)," Citi clarifies.

"That is interesting because it is more or less where the 200 week moving average now comes in. A breach of the 55 week moving average at 1.6465 on a weekly closing basis would need to be seen before confirming the next bearish break," Citi argues.

"GBP/USD continues lower and is likely to test the 55 week moving average and horizontal support levels at 1.6460-65.

"A weekly close below there may well open the way for a move to the 200 week moving average at 1.60 with interim support levels at 1.6381 and 1.6309. Given the general strength of the USD and Carney’s ongoing “U” turns, we would not be surprised to see the downtrend continue here."

Euro Weakness to Continue?

Turning to the shared currency we see forecasts for weakness are as pervasive as the bullish predictions on the USD are.

"The Euro has taken a tumble in the last 48 hours on the charts, and for many this comes as no surprise. What is most certainly clear is that the U.S dollar is getting back into strengthening mode on the charts and this can be seen across all pairs – it almost looks dangerous to go short on the USD at present," says Alex Gurr, Research Analyst at Blackwell Global.

With the latest meeting minutes showing that the FED is looking at increasing interest rates sooner than expected, markets showed strong support for the USD.

"However, this is dependent on job growth as Yellen has reiterated on numerous occasions, as she looks to support the economy as it struggles out of its present hole. Nevertheless the current sentiment showed in the FED is more hawkish than dovish and this bodes well for the US dollar bulls," says Gurr.

Mario Draghi will also be happy with the current sentiment as the US dollar strengthening looks to push down the Euro; which has been stubbornly high despite fundamentals not backing it up notes Gurr.