Cable bounces in European trading on Wednesday after data showed the UK economy grew above expectations in Q4 2020 and current account deficit, although widened below forecasts.
The recovery of two-day drop so far stays below pivotal barriers provided by 10 DMA (1.3789) and 55DMA (1.3820), weighed by Monday’s strong upside rejection that left bearish daily candle with long upper shadow and points to strong offers.
Larger bears from 1.4238 (2021 high, posted on Feb 24) face headwinds from key Fibo support at 1.3641 (38.2% of 1.2675/1.4238, reinforced by rising 100DMA) as last week’s weekly candle with long tail signaled, suggesting the pair may stay in prolonged consolidation.
Negative daily studies suggest the downside remains vulnerable, but weekly techs generate initial signal that corrective phase might be over.
Weekly 14-period momentum turned sideways above the centerline, stochastic is approaching oversold territory, while moving averages remain in bullish setup.
The US dollar remains inflated by growing expectations for swift economic recovery, as investors focus on President Biden’s fiscal package which is expected to be mainly spend on infrastructure and US jobs data (ADP private sector report due today and NFP on Friday) which is going to provide fresh signals.
Key levels lay at 1.3641 (Fibo 38.2% support) and 1.3849 (Monday’s spike high/20DMA) with break of either side to generate near-term direction signal.
Res: 1.3789, 1.3820, 1.3846, 1.3869
Sup: 1.3705, 1.3670, 1.3641, 1.3610
