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Chart Analysis: GBPUSD

CMC Markets

Sterling is breaking down today against the USD. The greenback has been gaining against other major currencies after stronger than expected housing starts provided more evidence for an improving economy adding to the case for taking away stimulus even though consumer price inflation at 2.0% was right on target. On the flip side, GBP has underperformed other major currencies today as speculation that the Bank of England could raise rates soon continues to fade. UK inflation came in below expectations, taking more pressure off the central bank to make a move. Cable (GBPUSD) has been in retreat for over a month now after peaking near $1.7200. Today it has broken down through its 200-day moving average and 38% retracement line, confirming the start of a downtrend. RSI is getting oversold again, so a pause or bounce to retest the breakdown point appear possible in the short term. Broader momentum still appears to be pointing downward. A 50% to 62% retracement of a trend is quite common so over the longer term, a move to test the $1.6375 to $1.6535 zone appears possible.

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