COMMENT-Sterling weekly and daily Charts engage in a duel

Conflicting chart signals and monetary policy uncertainty are currently gripping sterling and clouding near-term direction.

A key week reversal recorded for the week ending Apr. 12, higher high, lower low and close clear below previous closes, took GBP/USD into its weekly Ichimoku cloud. Despite the lack of a preceding bull trend the key week signal served to reinforce the drop from 1.2893, March high. Sterling remains inside its weekly Ichimoku cloud, another bearish signal.

However, the daily chart is showing signs of sterling strength, albeit only over the last two sessions. A base in place at 1.2406 and price pulling up and away from the 30-day lower Bollinger band, 1.2405.

Fourteen period momentum readings are negative on both the weekly and daily chart and give warning that sterling is not in the clear just yet. The daily relative strength indicator is, however, confirming the rebound from 1.2406, lifting away from over sold values.

On balance, sterling remains vulnerable to market sentiment swings linked to U.S. and UK monetary policy outlooks but there could be scope for GBP/USD to regain ground above 1.2500. Fibonacci retracement levels, 38.2% and 50%, taken off the recent 1.2709-1.2406 drop, provide targets at 1.2522 and 1.2558, respectively.