On Monday, the pair was still lingering slightly below its post-Brexit high of 1.4313. Thus, it is likely that the pair tests this mark or edges even higher towards the weekly R1 or R2 at 1.4234 and 1.4440, respectively, in this session, as the combined support of the 55– and 100-hour SMAs could guide the Pound and limit a fall below 1.42. In addition, another signal is provided by the dashed trend-line which was breached on Thursday.
Meanwhile, a fall below the 1.42 mark should continue until the 200-hour and the weekly S1 near 1.4150 are reached. In terms of fundamentals, the US is to release its Retail Sales at 1230GMT.
The GBP/USD currency pair closed Monday’s trading session with a solid 91-pip gain. The biggest surge occurred mid-day when the Pound dashed through 1.4313 - its highest position since the Brexit vote in June 2016—and reached the weekly R1 at 1.4335 later in the evening.
As apparent on the chart, the pair has started to consolidate near this mark, indicating that bulls might need some time to regain their momentum.
Being located in the overbought territory, technical indicators have already started to move lower. Thus, even if some upward movement is apparent during the first part of the day, the pair is unlikely to reach the weekly R2 and should remain below the 1.44 mark.
Meanwhile, significant support is set by the 55– and 100-hour SMAs and the monthly R1 near 1.4260.
After hitting the upper boundary of a short-term channel and a trend-line at 1.4367, the Sterling began its decline towards the 1.43 mark.
This bearish momentum was caused primarily by sluggish US average earnings report. It caused a fall of 50 pips as a result of which the Pound breached the 55-hour SMA. However, it remained at this line during the Asia session, demonstrating that bulls are still trying to regain their lost positions.
If this moving average is breached, the next target should be the weekly R2 at 1.4424. On the other hand, the pair is supported by the 100-hour SMA near 1.4270. This line is likely to restrict a deeper fall down to the weekly PP and the 200-hour SMA at 1.42 for some time.
The British CPI at 0830GMT is likely to guide the market sentiment for several hours.