GBP/USD may bounce in short term but remains under pressure

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The Sterling Pound has weakened in recent sessions with GBP/USD hitting a 1-week low on Monday and EUR/GBP retaining a bias in favour of a continued climb towards 0.8427.

The GBP/USD continues to see pressure to the downside ahead of the release of a number of different inflation readings due out this week in the UK, including the consumer price, retail price and producer price indices. ‘Of course all of these readings are important, but the one people really pay attention to, including the Bank of England, is the Consumer Price Index, or CPI figure,’ said Craig Erlam, market analyst at Alpari UK.

According to Karen Jones, technical analyst at Commerzbank, GBP/USD has sold off down to the 6 month uptrend at 1.6365. ‘While it is possible that we will see the market bounce here very near term, we believe that the market has recently topped at 1.6603 and ultimately the trend line will break as the market recently charted a key day reversal,’ she said.

However, José María Rodríguez, technical analyst at fxmania believes that the pair continues to be in a bullish trend, even if cable’s recent performance shows that it has slowed in its climb.

In the very short term the pair is trying to hold to the base of the short-term bullish channel. The above analyst alerts that should the pair break below 1.6333 it would fall to near 1.62 over just a few sessions.

Emmanuel Ng, FX Strategist at OCBC Bank, coincides with this view. ‘If the foothold at 1.6400 is lost, expect a further drift lower towards 1.6300 and then the 55-day MA (1.6278),’ he said.

EUR/GBP: downtrend targeted at 0.8427

Meanwhile, EUR/GBP has moved sharply higher to 0.8350. As Jones noted, initial resistance offered by the 0.8332/34 Oct 2013 low has been eroded. ‘We would allow for a deeper re-tracement to the 0.8369 55-day ma (moving average) and possibly the 0.8427 downtrend – if seen we look for this to provoke failure,’ she said.


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