Sterling under pressure ahead of PMI data

GBP/USD has dropped back considerably since its failed attempt to capture the 1.58 levels.

Currently trading below the 50-,100- and 200-day moving averages, there will tend to be strong bias to the downside for sterling.  The 100-day moving average should ultimately act as a barrier to upside, coinciding as it does with 1.5300. The 23.6% retracement from the 1.6380 highs to the 1.4830 lows is holding the pound for now. A drop through this level opens up the possibility for a pullback to 1.5140.

Despite the fact that RSI doesn’t currently demonstrate an oversold state for GBP/USD, today’s price action is suggesting that we might see a retest of the 100-day average in advance of any additional declines.

Moving averages are basically calculated by adding up the last ’X‘ period's closing prices and then dividing that number by X. Just like any other indicator they operate with a delay, but can normally provide both resistance and support, also serving as profit targets and providing a basis for placing a stop loss.

The RSI is not a perfect indicator, and should only really be used in conjunction with actual price action. It is merely a technical momentum indicator that compares the extent of recent gains to recent losses in an attempt to determine overbought and oversold conditions for a given asset.

GBP/USD chart

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