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Pound bounces back
The pound has made a small turnaround this morning as UK construction rose in September. Sterling has clawed back some of its losses after the UK announced a 1.8% increase in construction output which was a big swing from the 3% contraction in August. However, traders were anticipating an increase of 3.8% in September. Even though the figures missed estimates the pound still bounced, and these days sterling traders are happy with even remotely positive news.
We may see the pound move towards the $1.57 mark as short-covering kicks in, but I feel any moves higher will be short-lived and could provide a more favourable shorting opportunity as GBP/USD’s downward trend, that has been in place since July, is showing no signs of letting up.
If the pound takes out the recent low of $1.5655, it would put $1.56 on the radar and below traders would be looking to $1.55. On a daily basis the pound is oversold so we may see a snapback, but if $1.57 is taken out then $1.5750 and $1.58 would be the next two targets. If sterling wants to stand any chance of a confident correction it would need to clear the 200-hour moving average of $1.5872.