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BUZZ-COMMENT-Positive sterling signals emerge despite grim UK data

Credit: REUTERS/DADO RUVIC

While it is difficult to be fundamentally positive on sterling given dour UK economic indicators and the continuing spread of the coronavirus, the technical setup is starting to become constructive, with a topside range break looking distinctly possible.

Aug 27 (Reuters) - While it is difficult to be fundamentally positive on sterling given dour UK economic indicators and the continuing spread of the coronavirus, the technical setup is starting to become constructive, with a topside range break looking distinctly possible.

Industry data early Thursday showed UK car production recovering in July, but still down 21% on the year and the service sector cut jobs at the fastest pace on record in the three months to August, with more in the pipeline . Meanwhile, the coronavirus continues to expand in the UK - see chart.

The U.S. dollar downtrend supports cable. The =USD trend stalled in August, but weekly charts track south. Bounces on the daily charts have been capped at 94.00 this month, short of the 94.63 low in March, before markets sold off on the coronavirus. This sustains the negative technical bias.

Wednesday's 0.45% GBP/USD bounce turned the daily charts from neutral to positive. Momentum studies base, while 5, 10 and 21 daily moving averages are edging higher, which often happens at the range top - but so are the 21-day Bollinger bands, which is more unusual. The 1.3229 upper 21-day Bollinger band capped in August; if cable rises through the 1.3266 2020 high in coming sessions, it would be a strong bullish signal.

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gbp aug 27https://tmsnrt.rs/2EA4aNc

gbp c aug 27https://tmsnrt.rs/3jv5X5p

(Andrew Spencer is a Reuters market analyst. The views expressed are his own)

((Andrew.m.spencer@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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