Currency - GBP / US Dollar

The US economy is easing its way out of recession and the US dollar is displaying the enthusiasm of investors and traders for that recovery. There is also an element of safe haven buying into the US Dollar from investors who see the Euro as problematic and the Pound as a major concern. On the UK side of the Sterling - US Dollar exchange rate things are not good. The UK government debt is worrying credit ratings agencies, any election is likely to unsettle a currency but one that seems to be heading for a tight result is even more nerve racking and the UK may have just about exited recession in Q4 of 2009 but the annualised figures were revised downward and that doesn’t help Sterling.
So we saw the Pound fall from $ 1.6450 to $ 1.48 in just 6 weeks; that 10 percent drop will have benefitted UK exporters and caused all manner of hassle for UK importers who will be delighted to see that when this exchange rate hit the trendline support at 1.48, a line that can be tracked all the way back to January 2008 and a rate which coincided with the 61.8% Fibonacci retracement level, it bounced. This is the clearest signal you could have that this market is being traded very much on a technical basis and that is often the case when things are so unsettled. As long as the Pound manages to remain above $1.48, we could see further gains in this pair but I am very fearful that a fall below this level opens up the potential for a fall to 1.4336; the next Fibonacci level.