By IFCMarkets
Hello dear traders. Today we are going to analyze the sterling against the greenback forex couple. As we can see at the daily chart the currency pair breached the rising trend line and that increases expectations for a downside formation. In addition, the 20 and 50 Simple Moving Averages are creating a “death-cross” at the moment and that adds to the bearish expectations. However, the deep negative move from cap at 1.7187 to current support at 1.6811 does not include a reversal pattern and also represents a 78.6% retracement of 1.6692 to 1.7187. Therefore we could consider it as a deep corrective move and that implies upside bias could revive in following sessions.
At the below chart we can see the daily volumes of futures and options traded on the Chicago Mercantile Exchange. We can see that on the last trading sessions the volume dropped significantly while prices stopped at 1.6811 and that could signify a weakness in the power of the bears.
Looking at the oscillators, the Stochastic rose slightly above the oversold territory and the OsMA is still at the previous bottoms line suggesting downside is unlikely. The RSI (14) is down trending but in lower timeframes we see bullish divergence. In our opinion, chances seem to favor the upside reaction in the GBPUSD. The volume of trading activity has declined and therefore any break below 1.6811 could be fake. Macroeconomic releases today would also have their own impact. The UK Trade Balance is expected and should the Trade deficit narrows more than £8.9 billion then upside bias could be triggered.
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