Outlook for Pound Dollar Exchange Rate: "Selling a rally to 1.6570-80 might be the go"

The US dollar exchange rate complex has seen a strong 24 hours with the US unit proving to be the best performer on Wednesday. However, the UK currency was the second-best performer.

So what does this mean for the pair's outlook?

The team at FuturesTechs have today given us some insight into the matter. In their latest advisory note on the pair they say:

• Short Term Trend: Neutral-Bearish
• Medium Trend: Bullish
• Candlestick Chart says: Broke lower on the Fed and printed 1.6507 before staging a recovery.
• Profile Charts says: 1.6581-86 is a potential resistance area.
• Summary: Looking weak but not with any real conviction. Selling a rally to 1.6570-80 might be the go.

Dollar Soars as End of ZIRP in Sight

The Federal Reserve left investors with a very clear message overnight.

Janet Yellen began to set expectations for tightening. Bernanke went to lengths to make it known than tapering does not equal tightening but Yellen spoke about how and when rates will be increased.  

"In fact there was an entire new paragraph dedicated to how the central bank will approach the removal of policy accommodation and what sent stocks plunging and the dollar soaring was Yellen's comment that the first rate will most likely be 6 months after Quantitative Easing ends," says Kathy Lien at BK Asset Management.

According to Lien if the Fed maintains its current pace of tapering, asset purchases will cease in the fall, which means that the first rate hike will be in the summer of 2015.  

The net result has been a bullish US dollar exchange rate complex and a weaker commodity dollar complex.

We are seeing the likes of the Canadian, Australian and New Zealand dollars all suffer as global investors shift funds back to the US in anticipation of better interest rates and thus yields on their investments.