GBP/USD Conversion Rate Hammered on Financial Uncertainties Related to Scottish Referendum

Today's Dollar Exchange Rates (09/09):

• The Pound to Dollar exchange rate: The conversion is at 1.6096 - 0.06 pct down on last week's close.
• The Dollar to Pound Sterling rate: The conversion is at 0.6212.
• Euro to Dollar Exchange Rate: The conversion is 1.2882 - 0.09 pct lower.
• The Dollar to Euro Exchange Rate: The conversion is 0.7762.

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Outlook for the GBP/USD Deteriorates Further

Societe Generale have come out strongly on the sterling dollar rate following news that the UK could be about to split:

"To re-iterate our position on this, we believe that a ‘yes’ poses more questions than it answers, and this will be negative for sterling, perhaps to the order of 5% overall. It would increase moves for secession across Europe, increase the momentum for the UK to leave the EU and hurt Scottish economic growth potential.

"The near-term downside risk remains substantial."

Why the US Dollar Could be About to Fall

2014 is indeed turning out to be the year of the USD, just as many currency analysts had forecast.

However, the rally could be due a pause. Why?

Kathy Lien at BK Asset Management gives us these reasons:

By all counts the U.S. dollar is extremely overbought and due for a correction.

Friday's surprisingly weak non-farm payrolls report triggered a pullback in the currency but in light of its strong rally this week, the decline was extremely modest.

Payroll growth missed expectations by an eye-popping 88k and the magnitude of the miss should have triggered a more significant sell-off in the greenback.

One month of weak job growth does not make a trend especially since the August report can be volatile and subject to revision. For these reasons, we do not believe that the slowdown in job growth will kill the dollar rally.  

Investors have been piling into the greenback because of the lack of better alternatives, which is even truer after ECB easing.  

While the dollar could experience a further correction in the coming week, we expect the decline to be shallow and short-lived as investors view it as an opportunity to buy at lower levels.  

Pound Dollar (GBP/USD) Technical Outlook

Goldmans Sachs take a positive view for the GBP/USD's outlook:

"It reached 1.7192 in mid-July just a touch above the big 1.6750-1.7178 pivot area.

"This region has held a number of historical highs from Dec. ’96 to Oct. ‘99 as well as a cycle low in Dec. ’05 and an interim high in Aug. ‘09.

"The fact that it’s once again held should warn that a material turn is likely in the process. While it has moved quite a long way already, it seems over time further downside does look like something to consider seriously.

"The next big test should now be whether it can materially break below 1.6371-1.6302. This area is where a number of prior interim highs were set from May ‘12 to Jan. ‘13.

"If a meaningful weekly close could be achieved back below that point it would give further confidence that the market has set a significant top."

Euro Dollar (EUR/USD) Technical Outlook

Goldman Sachs confirm they are bearish on EUR/USD, a test of 1.19 could well be possible:

"So far, the decline has been sharp and impulsive, which happens to be quite typical of longer term wedges. As represented by the bear flag which developed in mid-August, consolidations should be short-lived and shallow; ultimately giving opportunities to re-establish bearish exposure.

"The only small concern here is the fact that both daily and weekly oscillators are near the bottom of their respective ranges. There has yet to be any material signs of a turn in either.

"Thinking multi-week/month, there is a decent case to be made for an eventual retrace back towards 1.23-1.19."