GBP/USD is flirting with a close below 1.5900 for the first time in nearly two months.
Today’s soft CPI report sent cable 100 pips lower to 1.5854 but in the next few hours, nearly all the gains were retraced. Was the bounce an symptom of underlying demand for the pound, or simply a retracement after three days of selling?
I lean to the second option because of the inability to rally back above 1.5950 and the drift lower in US after noon trading (last at 1.5895). Technically, the picture is increasingly negative.
cable daily
Targets could include the June high of 1.5752, the 100-day moving average or even deeper. Conditions aren’t oversold so there is plenty of room to be pessimistic.
The risks are from economic data. We saw how the market could move today on a miss; if we see the claimant count numbers tomorrow or retail sales on Friday beat expectations and the bounce is limited, that will be a signal to sell.