Fresh risk mode boosts pound but terrible UK GDP may limit recovery
Cable regains traction on Friday and recovers after strong fall on Thursday and today’s extension that was contained just above strong supports provided by 100DMA and Fibo 38.2% of 1.2074/1.2813 (1.2537/30).
Fresh risk mode that lifts US stocks in early Friday’s trading elevates sterling but record contraction of the UK economy (Apr GDP -20.4%) sours and may limit recovery.
Focus turns to Monday’s meeting of top UK and EU officials which aims to revive stalled talks about future relations between the UK and the bloc and is likely to increase volatility.
Larger bulls remain intact after corrective pullback stalled ahead of pivotal supports, however, more work at the upside is required to confirm reversal and fully turn near-term focus higher.
Key obstacle is 200DMA (1.2669) and close above here is needed to confirm higher low and accelerate recovery.
Conversely, the downside is expected to remain vulnerable if 200DMA caps recovery and violation of 1.2537/30 pivots would risk deeper pullback.
Res: 1.2638; 1.2669; 1.2753; 1.2777
Sup: 1.2537; 1.2530; 1.2500; 1.2440