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Market News The pound needs to break through the July high of 1.3960 before it is expected to continue rising to challenge 1.41

The pound needs to break through the July high of 1.3960 before it is expected to continue rising to challenge 1.41

According to the latest analysis of the pound against the U.S. dollar, Bill McNamara, an analyst in charge of investment firm The Technical Trader, believes that the September rebound of the exchange rate needs to break through the resistance level of 1.3960 in order to advance to 1.41.

Eden
2021-09-06
9662

On September 6, Bill McNamara, an analyst in charge of investment company The Technical Trader, said that the pound rose for the second consecutive week, and the increase is worth watching because the exchange rate crossed the 50-day moving average. He believes that the breakthrough of 1.3960 against the US dollar is a prerequisite for continued growth, and it may eventually rise to a high of 1.40 or even 1.41.



This week the U.S. dollar began to rebound against the British pound, the euro and other major currencies, as the market's decline has eased after the release of the U.S. employment report last Friday.

Chris Turner, Global Head of UK and Central and Eastern European Markets and Regional Head of Research at ING Bank, said: "The weak US employment report released last Friday is now conducive to the Fed’s dovish austerity measures, and will provide a boost for the dollar’s upward outlook. There are some negative effects."

Turner added: “The Fed’s announcement at its September 22 meeting to reduce the scale of bond purchases seems to be getting smaller and smaller.” The August non-agricultural employment report showed that the number of non-agricultural employment was significantly lower than investor expectations. 235,000 people, far below the 750,000 people expected by the market. These data clearly show that under the pressure of the recovery of cases caused by the Delta virus, the US economic recovery has slowed down. The expectation of a slowdown in economic recovery provides the Fed with an opportunity to remain cautious, which may weaken the dollar in the short term.

The non-agricultural situation in the United States is as follows


Against the backdrop of weak dollar fundamentals, there are signs that the technical barriers to the dollar’s summer rally have begun to rise, and recent signs indicate that it may fall further.

Georgette Boele, senior foreign exchange strategist at ABN AMRO, said that when the U.S. dollar approached important support levels for the euro against the U.S. dollar (1.17) and the British pound to U.S. dollar (1.36), the dollar’s rebound lost momentum. As the momentum was not strong enough, it failed to force the market to break, and the result was profit-taking on the dollar's long positions.

Bill McNamara, the chief analyst at The Technical Trader, believes that the weakening of the US dollar is still the main driving factor for the pound against the US dollar. If future data support the view that the domestic economic recovery in the United States is losing momentum, it is conceivable that the dollar may weaken further.

He added that the July middle high of 1.3960 is the next possible resistance level for the pound against the dollar. If this resistance level can be broken, the pound against the dollar may see a short-term rise to around 1.41.



(Pound against the U.S. dollar daily chart)

At 16:38 on September 6th, GMT+8, the British pound was quoted at 1.3844/46 against the U.S. dollar.

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