Will GBP/USD Correct Higher or Restart Downtrend?

2014 has been widely tipped to be the year of the US dollar, however a cold winter in the US and an outperforming UK economy conspired to push the pound dollar exchange rate higher.

However, the mid-year trading period has seen the USD make a comeback - the question is whether this strength will extend. We present a number of viewpoints on the matter.

Firstly, for the sake of reference, the pound to dollar conversion (GBP/USD):  The exchange rate sees 1 GBP buy 1.6253 USD at the weekend.

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Forecasts for the Pound Dollar Exchange Rate

• Luc Luyet at Swissquote Research tells us:

"GBP/USD has broken its short-term rising trendline, favouring a short-term corrective phase towards the support at 1.6162 (16/09/2014 low). The hourly support at 1.6285 is challenged. An hourly resistance lies at 1.6416, while a key resistance stands at 1.6525.

"In the longer term, the collapse in prices after having reached 4-year highs has created a strong resistance at 1.7192, which is unlikely to be broken in the coming months. Monitor the recent rebound as it could signal the start of a medium-term consolidation phase. A support lies at 1.6052, while a strong support stands at 1.5855 (12/11/2013 low). A resistance stands at 1.6644."

• Karen Jones at Commerzbank says:

"GBP/USD we suspect that the correction higher is losing steam and note that the short term uptrend at 1.6357 has given way - we will look for resumption of the down move.

"We look for losses to 1.6290 and 1.6160 ahead of the 1.6053 recent low. Longer term we look for losses back to 1.6007/00 (200 week ma and 50% retracement of the move up from 2013) then 1.5721 the 61.8% retracement of the move from 2013.

"Current trade: Short 1.6345 Recommended Trade: add 1.6450, stop 1.6570. Exit 1.6175."

• According to ICN Financial, the outlook is positive above 1.6285, risk-limit below 1.6165:

"The pair provided negative trading yesterday approaching the pivotal support 1.6285, and as referred to in our latest reports, stability above the latter keeps the bullish expectations valid, but the strength of USD forced the rest of the currencies to drop yesterday.

"Generally, we hold on to the positive expectations that target mainly 1.6625, and achieving it require stability above 1.6285."