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Global Head of Currency Strategy at Brown Brothers Harriman, Marc Chandler notes that Sterling has been the whipping boy of the market this year, worsened only by USD and JPY in weakness.

He notes that it made new lows at the start of the week, but these losses were not confirmed by the RSI, leaving a bullish divergence in its wake which he feels set the technical stage for the recovery in the second half of the week. He notes that the advance ahead of the weekend saw sterling flirt with its 20-day moving average for the first time in nearly a month. Further, he notes that the MACDs are also trying to turn higher, but the $1.5850-$1.5900 offer formidable resistance.

He writes, "Against the Euro, sterling staged its biggest advance in since late Oct 2011. The Euro had peaked at the start of the month near GBP0.8720 and the GBP0.8400 area represents a 50% retracement of this year's gain. A move toward there would be consistent with our expectation for additional, albeit modest, extension of what we see as corrective forces. However, a convincing break of GBP0.8400 could signal a deeper retracement toward GBP0.8325 initially."
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