The pound looks to have found its feet following a three-week period of declines versus the G3 currencies and other units. There was only a limited flurry of selling after BoE deputy governor Shafik said yesterday (September 28) that “further monetary stimulus will be required at some point.” EURGBP yesterday posted two straight lower lows after capping out at a six-week peak on Monday, and Cable has found a toehold above 1.3000 amid an abating downside momentum indicators. Nothing has changed on the UK’s fundamental front, and most forex participants have been overlooking incoming data showing a rebound in activity from the post-Brexit vote wobble and instead focusing on the long and uncertain road ahead until the UK’s new relationship with the EU becomes clear. Both the Q3 BoE agents report and the British Chambers of Commerce have flagged falling business investment, which the latter expects to decline by 2.2% this year, and by 3.4% in 2017.
Should the rising trend be breached and broken around 0.8600 level then there could be further downside potential to the 0.8520 area which is the 14 Day ATR and confluence of the 20 and 50 DMA’s. Target 2 could be below the recent 38.2 Fibonacci level and into a previous congestion zone formed post the Brexit vote at 0.8470. The longer term Monthly and Weekly trends remain bullish and a further attempt of 0.8700 and the August High at 0.8725 cannot be ruled out. An interesting end to the week, month and quarter awaits.
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