By Gary Howes

The British pound is forecasted to lose ground against the US dollar on a technical basis. However, fundamentals suggest the UK unit should find support.

The pound dollar exchange rate traded in a tight range on Monday centering around the rate of 1.6488. Ahead of Tuesday's inflation data it would seem the theme is 'more of the same.'

Note all quotes are from the mid-market, your bank will affix a spread to the rate at their discretion. An independent FX provider will however guarantee to get you closer to the market quote, thus delivering you more currency. Please learn more here.

Be prepared for further falls in the Cable

A decidedly bearish forecast on Cable has been issued by Emmanuel Ng at OCBC Bank today who notes the waning momentum behind the UK currency:

"With the GBP losing its data-driven luster in recent sessions and implied long GBP positioning at elevated levels, the pound may be relatively more susceptible to any near term episodes of broad-based dollar strength. We look to a tactical short GBP-USD (spot ref: 1.6490) targeting 1.6230, with a stop placed at 1.6625."

Lloyds Bank say GBP-USD to remain supported

Short-term technical forecasts are decidedly bearish when it comes to the UK currency.

However, fundamental opinion often runs contrary to what the charts tell us, this is certainly the case with the viewpoint held at Lloyds Banking Group:

"GBP has been on the back foot for the last couple of weeks, falling against both the USD and the EUR is spite of still relatively strong UK data, and while GBP was off its lows against the EUR on Friday, this relative GBP weakness has undermined sentiment for now.

"The best explanation rationale for GBP declines is probably simply an unwinding of excessive positioning, but the fact that both the US and Eurozone produced better current account data in the last week highlights this as a weakness in the UK, and this Thursday’s data will consequently be of more than usual interest.

"Even so, the cyclical indicators still support relative UK outperformance, and suggest potential for GBP gains against the EUR and CHF if market risk appetite improves and the UK data continues to suggest that UK rates will keep pace with the US."

Quite trade ahead of UK inflation data release

Monday has seen relatively subdued moves in the headline GBP-USD rate. This is understandable considering the data events that lie ahead. Sean Lee at FXWW notes:

"Cable has been mostly following the price action in EUR/USD today with no econ data out of the UK

Traders are staying on the sidelines ahead of the UK CPI release tomorrow.

"Key technical support seen 1.6450-60 (trendline supp); a close below would be a serious sign of a top on the higher timeframe charts, paving the way for a 1.6340/50 test and eventually 1.6250 (February low).

"On the order book, light bids ahead of 1.6450; stops building below.

"To the topside, offers at 1.6520 + selling interest from ACBs 1.6535-40."