A release of better than expected growth rate of the UK Manufacturing Production created an upside momentum that enabled the pair to return back to the 1.3228 level. However, then fears of growing political risk in Britain and Trump’s participation in the ASEAN summit strengthen the buck and dragged the exchange rate to near the 1.3120 mark. On the one hand, the further road to the bottom is obstructed by the lower support line and the 23.6% level. However, if the current pressure continues this barrier may not sustain. In that case, the cable is going to test the next lying around the weekly S1 at 1.3090. It should be noted that recovery of the Pound also looks unlikely, due to pressure from the falling 55-, 100- and 200-hour SMAs.
As it was expected, recovery of the Pound after rapid fall on Monday was neutralized by a combination of the 55-, 100- and 200-hour SMAs. From the southern direction the same function was exercised by support zone near the 1.3112 mark. In other words, the cable moved horizontally, anticipating the release of the British inflation data.
At the moment, the rating is moving to the bottom, but if the released data beats expectations, market reaction might be large enough to bypass the above moving averages and elevate the rate to the weekly PP at 1.3160. In the opposite scenario, the sell-off of Sterling might be so active, that the currency rate will pass through the monthly S1 at 1.3072 and stop only near the 0% retracement level at 1.3039 and then resume the plunge towards the bottom edge of large descending channel.
A release of latest update on the British inflation sent the cable to test support zone near the weekly S1 at 1.3090. However, by the end of the day the Pound managed to recover and returned back to the 50% Fibonacci retracement level at 1.3180. Due to support formed by a combination of the 55-, 100- and 200-hour SMAs the pair is expected to spend first half of this trading session between the 1.3180 and 1.3125 marks.
These barriers have a good chance to withhold the rate even during release of the UK earnings data. However, the further movement of the cable is difficult to project, as it will heavily depend on release of the US inflation and retail sales data.
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