Bulls take a breather after strong rally on Friday; daily cloud top marks key support
Cable eased to 1.2425 as traders booked profits after last Friday’s 1.36% advance which was capped by strong barrier at 1.2501 (Fibo 38.2% of 1.3381/1.1958 descend, reinforced by falling 100DMA).
Today’s repeated upside rejection (1.2503) pushed the price lower, as bulls are losing momentum and look for consolidation before fresh attempts higher, as bullish outlook was boosted by Friday’s break and close above thick daily cloud.
Consolidation should ideally hold above daily cloud top (1.2400) to keep bulls intact, but fundaments remain pound’s key driver and fresh developments in Brexit story as well as series of important releases, scheduled this week, are expected to provide direction signals.
UK PM Johnson will meet European Commission President Juncker today, in attempts to make some revisions on existing divorce deal ahead of key EU leaders’ summit in mid-October.
Improved environment in high expectations of Brexit extension and sidelined fears of no-deal scenario, keep pound supported, with key releases due this week (UK CPI on Tue; Retail Sales / BOE rate decision on Thu and Fed policy meeting on Wed) expected to have strong impact on sterling.
Near-term action is expected to remain biased higher while holding above daily cloud, but will need repeated close above 1.2468 pivot (Fibo 61.8% of 1.2783/1.1958) for confirmation and signal of fresh extension higher.
Conversely, penetration of daily cloud would harm bulls and signal deeper pullback towards 1.2323/02 (10/55 DMA’s) and 1.2295 pivot (Fibo 38.2% of 1.1958/1.2503 upleg).
Res: 1.2501; 1.2510; 1.2558; 1.2588
Sup: 1.2425; 1.2400; 1.2384; 1.2323