Forex Investment and Currency Trading

The GBP has been the weakest of the European currencies in 2008, with only the CAD trailing the GBP among G10 currencies this year. In fact, over the last week the trade-weighted GBP traded at its lowest level since March 1997. However, versus the weak USD the GBP has begun to display impressive performance. First, GBP/USD appears to have tested and held its January 22 low (1.9338) in late February, forming a double bottom pattern. While the recent USD recovery brought the GBP lower, GBP/USD impressively held support formed by the 55-day moving average (1.9768) and trend-line support (1.9751) from the June and August lows. The bounce above 2.00 today breaks a key level, but more important resistance will come at the 200-day MA, currently at 2.0145, followed by trend-line resistance, currently at 2.0333. A close through those levels will target a test of the March 14 high of 2.0393, with an eventual test of 2.10 likely during 2Q 2008. A close below trend-line support (1.9751) would turn the outlook decidedly negative.