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Forex: GBP/USD rally runs out of steam, finishes day sharply lower

FXstreet.com (Barcelona) - The Sterling finished the day sharply lower, down 58 pips at 1.5481. After what had been an impressive rally off the lows from early March, the pair was capped at 1.5600 the previous three days and finally gave way to lower prices. Economic data on tap in the coming session out the UK will be limited to the Halifax House Price at 7:00GMT. The pair is currently in a narrow range during Asia trade, down six pips at 1.5478.

According to Kathy Lien of BK Asset Management, “With no major U.K. economic reports on the calendar, sterling traded lower against the dollar and euro. Having tested and consolidated below 1.56 for the past 4 trading days, today's reversal in the GBP/USD points to a potential top. With no economic data on the calendar until Thursday, we will have to wait and see if this becomes a more significant turnaround for the currency pair. “

She went on to add, “Given the recent improvements in U.K. data, investors will be looking for more upside surprises. If the data delivers, the GBP/USD could aim for another test of 1.56 but if industrial or manufacturing production declines, this pullback in the sterling could become a more significant top for the pair.”

From a technical perspective, short term moving averages are now in neutral set up with price consolidation between the 9 and 20 dma’s. Initial support sits at 1.5547 (previous day low), followed by 1.5399 (the 20dma). First resistance is at 1.5515 (the 9dma), followed by 1.5552 (previous day high).

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The AUD/USD has bounced the lows set earler in the session at 1.0155 and is now trading just a few pips lower at 1.0181. Earlier in the session the China Trade Balance was released which was the initial catalyst for the rebound in the pair.
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