Sterling Tests Support Levels as Momentum Turns Negative


Sterling remains a loser, showing about a 1% decline against the dollar and a 0.6% loss versus the euro, having tumbled from a one-month peak in the case against the latter. The pound, ignoring remarks yesterday from Chancellor Osborne about the approach of tighter monetary policy, has been under the pressure since the September CBI industrial trends survey unexpectedly dropped to a -7 reading, and government borrowing rose more than expected in August.

The data adds to a growing list of signs, including the August PMI surveys and retail sales figures, pointing to a moderation in economic activity. BoE’s Cunliffe said on Monday that while UK growth was robust, price pressures were absent and concerns about the China economy have been rising.

The currency pair tested support near an upward sloping trend line that comes in near 1.5260. Additional support is seen at a horizontal trend line at 1.5150. Resistance is seen near the 20-day moving average at 1.5370. Momentum is negative as the MACD (moving average convergence divergence) index generates a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal.

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