Sterling Chf has been trading in a very narrow down channel since the beginning of May. With RSI’s hovering around 50% it looks like these levels may well stay in place in the near term. Currently we are testing the top of this channel around 1.4386 and we would need to see a clear break before I think that this downtrend is broken. For now if the technical level holds we would expect the currency pair to head back towards 1.4130 which is the bottom of the trading range.
The main fundamental issue to concentrate on would be the second quarter UK GDP data due to be released later today. Most analysts expect a figure of around 0.6% which would confirm that the UK is recovering well from recession. Sterling has appreciated in anticipation of a positive figure and my hunch is that we will need something slightly better than expected for the momentum to continue.
So the catalyst for near term direction will derive from the data - A better data release could result in a break out of the current trading range however if we get 0.6% or heaven forbid something a little worse than we could see the price fall quite aggressively.