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The pair found its footing on Monday after having traded as low as $1.5540 and the momentum has taken it back into the sell zone. A downtrend can be drawn from July 2014 highs, which has been capping any recovery attempt, particularly through October and November. This downtrend currently comes in at $1.5670 and a failure to break above it could see the pair head back to the bottom of the recent range just under $1.5600.
From there, the bears will be eyeing a break of support before adding to shorts. If this support is breached, then a test of $1.5400 is possible by year end. Economic data out of the UK continues to disappoint, with yesterday’s manufacturing and industrial production readings falling well short of expectations. Later today we have trade balance figures to look out for. Any further signs of weakness in the economy could drive fresh weakness for the sterling.