Bears extend and focus key support ahead of election of Britain’s new PM
Cable stays in red for the third straight day and extended weakness from 1.2558/56 double-top to new two-week lows.
Monday’s close below 10DMA (1.2491) generated initial bearish signal, which was reinforced by Tuesday’s break below 1.2449 (Fibo 61.8% of 1.2382/1.2558 upleg).
Bears eye key support at 1.2382 (17 July low, the lowest since Apr 2017), violation of which would spark extension of larger downtrend from 1.3381 (2019 high).
Apr 2017 trough at 1.2365 marks immediate support but bears could extend towards 1.21 zone on stronger acceleration lower.
Broken 10DMA offers initial resistance at 1.2491 and is expected to cap and keep intact trendline resistance at 1.2522 (bear-trendline drawn off 25 June high at 1.2783) which maintains bearish bias.
Overall environment is negative for pound, as bearish sentiment persists among traders on concerns that Boris Johnson, who is likely to be elected today as Britain’s new Prime Minister, as well as the leader of governing Conservative Party, could pull the country out of the European Union without a trade deal that could have strong negative consequences on country’s economy.
Res: 1.2479; 1.2491; 1.2522; 1.2542
Sup: 1.2423; 1.2400; 1.2382; 1.2365