Bears are taking a breather above 1.30 pivot, on track for the biggest weekly loss in over 2 yrs
Cable is consolidating above psychological 1.30 support (cracked on Thursday’s dip to 1.2989) in early Friday’s trading, after suffering heavy losses in post-election trading (down 2.5% on Mon/Thu fall) and on track for the biggest weekly losses in more than two years.
The sentiment soured after post-election euphoria faded and fears of a no-deal Brexit at the end of 2020 rose, as PM Johnson took a hard line and limited post-Brexit transition period.
The British parliament will vote on Johnson’s Brexit plan today, with the majority in the parliament he gained after election victory, expected to pass it this time.
The Bank of England kept policy unchanged in line with expectations, but split vote of the MPC, as two members continuing to push for rate cut, increases possibilities of easing in 2020 and keeping pressure on sterling.
UK Q3 GDP data release would also impact pounds performance. Forecasts show unchanged levels from Q2 (q/q 0.3% f/c vs 0.3% prev / y/y 1.0% f/c vs 1.0% prev) with results below consensus to add to pound’s negative stance.
Daily techs weakened but oversold stochastic and flat momentum warn that bears may extend consolidation before final break through 1.30 pivot.
Weekly studies show more negative signals as price broke below 200WMA (1.3090); indicators (momentum, stochastic and RSI) are heading south and massive bearish weekly candle is also forming bearish engulfing pattern that generates strong negative signal.
Weekly close below 1.30 pivot would add to negative outlook and expose pivotal Fibo support at 1.2919 (38.2% of 1.1958/1.3514), which guards the top of rising daily cloud (1.2840).
At the upside, broken daily Kijun-sen (1.3168) should cap extended upticks and keep near-term bears in play.
Res: 1.3037; 1.3070; 1.3132; 1.3155
Sup: 1.3000; 1.2989; 1.2919; 1.2895