© Dukascopy Bank SA
Amid disappointing statistics from the U.K., the cable moved lower last week, hitting 1.6555 on April 4. Britain's economy is on the mend and the recent weakness is projected to be only temporary. Nonetheless, all three pillars of the economy– manufacturing, construction and services, posted weaker-than-expected growth, suggesting the economy can loose some momentum in the first quarter. At the same time, the Sterling is projected to be highly volatile this week, as on Thursday policymakers will gather to assess the current state of domestic economy. They are expected to stay pat, however, any hints on future moves or hawkish comments will immediately send the Sterling higher.
Dukascopy Community members are strongly bullish on the pair, as more than 57% of respondents believe the pair will appreciate this week. The consensus forecast stands at 1.6587, significantly below Tuesday's price that was above 1.67. It seems that traders were not expecting such a strong reaction on the manufacturing production from the U.K, that came above analysts' forecasts, providing a strong bullish bias for the Pound.
From the perspective of technical analysis, the outlook is bullish as well. The main reason for such a suggestion was a penetration of the upper trend line of the channel down pattern on the 4H chart. The pair has been depreciating since February 17, when the pair hit this year's high at 1.6823– above the weekly R3. Since then the cable moved back to 1.64 level, and even Fed's hints about the upcoming rate hike were not able to provide a massive sell-off of the pair. Keeping in mind stronger-than-expected fundamentals from the U.K., 'buy' signals from the technical indicators, a penetration of the upper trend line and bullish view from traders, the pair is likely to climb higher this week.
© Dukascopy Bank SA