GBP/USD down 0.4% to below 1.3800 on the day
The dollar may be keeping more resilient amid more dour risk tones in the market but it is tough to really pinpoint any reason for the pound’s underperformance today, in which the currency is even lagging the loonie in European morning trade.
The only thing I can really point towards is a technical move with GBP/USD keeping lower after failing to breach its 200-hour moving average at around 1.3867 yesterday, and also with GBP/JPY breaking below the 3 August support at 151.17.
Adding to that is EUR/GBP coming up for some air after having tested waters below 0.8500 to its lowest levels since February last year for a brief period last week.
Going back to cable, price action is more defined in the sense that we are seeing buyers and sellers respect key technical levels for the most part since mid-June.
Last month, buyers attempted a break above the 100-day moving average (red line) but fell short of mustering further momentum when meeting the 23-24 June highs and 61.8 retracement level just below the pivotal 1.4000 mark.
That has seen price action fall back to being more ‘trapped’ in between the key daily moving averages now as we see some consolidation.
But with the push lower today, we are drawing closer to the 200-day moving average (blue line) @ 1.3776. A push below that also coincides with a drop below the 50.0 retracement level of the July swing move higher @ 1.3777 and that could open up the path towards a slippery slope for cable in the sessions ahead.
The downside risk is that a break below the key technical level above could expose another drop towards testing support near 1.3600 next with the July low @ 1.3572 a clear target for sellers if they are to regain more bearish momentum.
The pound side of the equation has hardly changed since the BOE meeting two weeks back so the next firm directional move rests a lot on dollar sentiment (and also broader risk sentiment), with today’s US retail sales data going to be a key one to watch.