Cable traded within narrow consolidation range in Asia on Thursday, following strong fall in past two days and awaiting the third key release this week, UK retail sales.
Pound was hit by weak data in past two days, as downbeat UK wages and inflation sparked strong pullback from new post-Brexit recovery high at 1.4376.
Pullback dented solid support at 1.4185 (rising 10SMA) but managed to close above on Wednesday, while today’s repeated probes below 10SMA (currently at 1.4207) were so far short-lived. Two-day pullback on Tue/Wed generated bearish signal on close below 1.4219 (Fibo 38.2% of 1.3965/1.4376 upleg) which needs confirmation on repeated close below and also close below rising 10SMA.
Reversal pattern is forming on daily chart and sees risk of deeper pullback towards 1.4243/22 (rising 20SMA/Fibo 61.8% of 1.3965/1.4376).
Pullback has dented bulls on daily chart, however, daily indicators are still in bullish setup and require repeated close above 10SMA to generate initial signal of correction end and formation of higher low, with confirmation on recovery extension and close above 1.4250 (Fibo 38.2% of 1.4376/1.4172 pullback).
Forecast for UK retail sales is negative (Mar -0.5% f/c vs 0.8% in Feb/core -0.4% f/c Mar vs 0.6% in Feb) and release in line with expectations or below would put sterling under fresh pressure.
Positive sentiment among investors over strong expectations for BoE rate hike next month faded after disappointing wages and CPI and picture could be soured further on retail sales miss.
Res: 1.4220, 1.4250, 1.4274, 1.4298
Sup: 1.4185, 1.4170, 1.4143, 1.4122
