GBP/USD eyes 50-DMA
Sterling was been trading within the tight range of $1.52-$1.5260 this week, and the market is preparing for the Bank of England inflation report tomorrow at 10.30am (London time). Mark Carney is expected to issue a deflation warning that will subsequently put major pressure on GBP/USD. The eurozone is the UK’s largest trading partner and the region is already experiencing negative inflation growth; now a similar problem is seeping into the UK.
Looking at the relative strength index indicator, GBP/USD is right in the middle of the aforementioned trading range on both the daily and hourly chart, and this sums up how lackluster trading has been. The pound has been in a downward trend since July, and even though we have seen some signs of recovery from it, there is no evidence to suggest the trend is changing.
The 50-day moving average at $1.5285 is acting as resistance, and if this level is held the downside support at $1.52 will be brought into play. If the pound clears the 50-DMA, this metric will then act as support and the upside resistance at $1.5340 will be the target.