Sterling has been hit by a wave of dovish Bank of England commentary in recent sessions and now yesterday’s very weak inflation data. However, to see Cable closing higher on the day shows how strong the band of support between $1.2900/$1.3000 has become. We continue to see this area as supportive on a medium term basis and the price action of the last two sessions does little to change this view. It is interesting to see that the RSI has picked up again around the 40 mark, whilst MACD lines are moderating their decline around neutral and Stochastics are looking to bottom out around the 20 mark. The next step for the sterling bulls would be to break the downtrend of the past couple of weeks (at $1.3070 today). The hourly chart shows how selling momentum is now reversing, but there is a band of resistance from a near term pivot at $1.3050 that needs to be overcome in order to build on the recovery. Above $1.3095 would be a first real lower high breached and see the near term trend turning positive again.
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