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Despite the overall strength of the Sterling, the rally that has been in place on the cable since July, is running out of steam. The ascending triangle pattern formed on a monthly chart is moving to its apex, while an 83-bar long channel up on a hourly chart has been already broken and the pair is trading below the support line already. Traders are supporting the idea of waning bullish pressure, as 66% of them are holding short positions on the cable, while the overall attitude towards the Pound is bearish as well– the currency is sold in 61% of the time.
The situation with the cable is more clear, as according to Dukascopy Community members, the pair will reach 1.6677 by this Friday. At the moment of writing the pair was changing hands at 1.6703, hence, the outlook is bearish even despite the fact sentiment among respondents is not clearly marked. The idea of the upside movement from the cable is also supported by Mimuspolyglottos, who said "I did not find any supportive factor regarding inflation in last week's BoE Inflation Report for GBP so I am expecting upside momentum in GBP/USD will persist only for a short time." Moreover, he thinks that "upside pressure should weaken on the Sterling as soon as rumours about sale of Vodafone's assets become the fact."
From the perspective of the fundamental analysis, the pair is projected to be highly volatile, keeping in mind a set of high importance events in the world's largest economy, while Wednesday's MPC votes, unemployment rate and jobless claims will have a strong impact on Sterling's performance. The U.K. economy has lost its momentum at the beginning of 2014, hence, there is a high possibility data will surprise markets to the downside, while MPC members can express dovish views, sending the Pound lower.
© Dukascopy Bank SA