Three down-days in a row is not a great sign for a pair, but that’s what we have got on GBP/USD.
Monday was statistically more likely to be an up-day but it upended expectations and the exchange rate moved lower.
It was driven by US Data which was pretty much in line – or above expectations, with Personal Consumption Expenditure, which is the inflation gauge most favoured by the Federal Reserve rising 1.7% as forecast.
Fears that US housing might be about to take a tumble were allayed, meanwhile, by a higher than expected increase in Pending Home Sales.
Forecast from Here
FX Broker Hantec’s market analyst Richard Perry sees the exchange rate probably falling to 1.2430.
“Sterling is now beginning to underperform as a third consecutive bear candle has formed against the dollar. The market is continuing its corrective move back to $1.2430 and this will be a key test for the near to medium term outlook,” he said in a note seen by PSL this morning.
Perry notes how momentum is concurring with the other bearish signs:
“The daily momentum indicators are rolling over with the Stochastics crossing lower and are close to a near-term sell signal. If the RSI breaks back below 50 this would also be a negative development.”
The new series of lower highs and lower lows on the hourly chart is a further sign the short-term trend could be flipping lower.
“The hourly chart now shows that a formation of lower highs and lower lows is building, with $1.2600 resistance under the $1.2673 recent key high,” said Perry.