Bulls are taking a breather after 3.6% rally and awaiting fresh signals from Brexit talks
Cable dips to 1.2555 in early European trading on Monday as traders booked some profits from past two days 3.6% advance, but remain cautious, as further advance could be expected on fresh positive Brexit news.
Renewed optimism for Brexit deal before 31 Oct deadline, pushed pound to 1.2706 on Friday, the highest level since 28 June, with strong rally being so far capped just under significant barriers provided by 200DMA (1.2711) and Fibo 61.8% of 1.3179/1.1958 (1.2713).
Pullback so far looks like positioning for fresh upside action and should ideally find support at 1.2500 zone (near-Fibo 38.2% of 1.2197/1.2706 rally) to keep near-term bias with bulls.
Top EU/UK negotiators described last week’s talks as constructive and will hold another round of intense negotiations this week, keeping in play hopes for the last minute deal, which would be approved on EU summit on Thu/Fri this week.
However, caution is required despite prevailing optimistic tones, as ‘buy the rumors – sell the facts’ scenario cannot be ruled out.
Today’s pullback so far holds above rising 10DMA (1.2554) with daily indicators pointing lower and signaling further easing, as daily cloud twist next Monday (1.2260) could be also magnetic.
Ideal scenario of reversal above 1.2500 support zone would keep focus shifted higher for renewed attack at 1.2711/13 pivots.
Break of 1.2500 pivots would risk extended pullback towards 1.2450 (daily Kijun-sen) and 1.2392 (rising 20DMA / Fibo 61.8% of 1.2197/1.2706 Thu/Fri rally).
Res: 1.2580; 1.2615; 1.2645; 1.2706
Sup: 1.2554; 1.2512; 1.2450; 1.2407