The pair’s pull back from 1.5814 topping out to form a resistance there extended lower last week but it’s still trading inside support zone of 1.5088. As long as 1.5088 support holds, another rise could still be seen. And, above 1.5814 will target 61.8% retracement of 1.7190 to 1.4565 at 1.6187. At this point, am slightly favoring that the rebound from 1.4565 as a correction. Thus, break of 1.5088 will indicate that such rebound is completed and turn focus back to 1.4565 low.
The pound has come under pressure amid renewed concerns over a U.K. referendum on EU membership. Prime Minister David Cameron’s government introduced a law in parliament on Thursday to ensure the referendum will be held by the end of 2017.
Sentiment on the pound was also hit after a report on Friday showed that British consumer sentiment deteriorated unexpectedly this month as optimism about the economy over the next 12 months declined.
The report came just one day after official figures confirmed that the U.K. economy grew just 0.3% in the first quarter, fuelling concerns that the economic recovery is losing momentum.
Recent soft economic data has underlined expectations that the Bank of England will leave interest rates on hold for longer.
Meanwhile, the U.S dollar strengthened broadly in May as stronger U.S. economic data prompted investors to bring forward expectations on the timing of an initial rate hike by the Federal Reserve.
Upbeat reports on inflation, new home sales, business investment and consumer confidence during the month all indicated that the economy is gaining momentum after a weak first quarter.
In the week ahead, Friday’s U.S. employment report will be closely watched for signs of improvement in the labor market. In the U.K., surveys of the manufacturing, construction and service sectors and Thursday’s rate announcement by the BoE will be in focus.