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GBP/USD $1.964

The outlook for the currency pair looks quite muddled, with the dollar bouncing up and down and the sterling highly sensitive to news about the state of the UK economy. This week’s flurry of economic news in both the UK and the US shouldn’t surprise investors, which are having to face a slowdown, if not a recession, in both countries. Richard Cunningham, managing director at City Index Advisory, says: ‘The intermediate trend for the GBP is negative and well defined by the declining 50 day average,’ and that price action is continuing to build below the key 200-day average at $2.0122, which he says has recently turned trend-negative. However, while the technical picture showed the currency pair was set up for a price-break out and a push below $19, the break back above the $1.9620, according to Cunningham, now negates this technical set-up, and we should see the dollar staging short-term decline. We suggest buying the pair with a tight stop loss at $1.9.

ACTION: BUY GBP/USD • Target $2.10 • Stop Loss $1.90

TIME TARGET: 4 WEEKS