Near-term action remains volatile and without clear direction
Cable is holding within tight range and maintaining positive tone on fresh optimism after Boris Johnson took office as Britain’s new PM that temporarily overshadows fears of no-deal Brexit.
Talks about new deal, referendum, election or another extension of Brexit deadline, bring various scenarios in play again.
First steps of new PM to dismiss a number of members of May’s cabinet, added to volatility.
Boris Johnson will face the same obstacles as his predecessor Theresa May and will not have much time as summer break in August will keep the whole process on hold and then the problem will need to be solved in two months – September and October.
Johnson promised a new Brexit deal, which looks quite unlikely and possible way out of current deadlock would be new Brexit referendum, as nothing has substantially changed in whole story after May’s repeated and unsuccessful attempts to get more concessions from the EU and persuade the UK parliament to approve her plan.
Near-term action holds within triangular consolidation above new multi-month low at 1.2381 and lacking firmer direction signals for now.
Wednesday’s rally was capped by falling trendline from 1.2783 (25 June high) and closed below 10DMA (1.2489) that keeps the downside vulnerable.
Rising momentum; falling stochastic and flat RSI are conflicting and focus turns towards ECB and Fed that would provide fresh signals.
Break above triangle resistance and 20DMA (1.2503/22) would provide fresh bullish signals for further recovery, which would require validation on lift above 1.2566/79 (30DMA / 12 July high).
Conversely, repeated close below 10DMA would provide initial negative signal, while break and close below triangle’s support line (1.2438) would further weaken near-term tone and increase downside risk.
Res: 1.2484; 1.2503; 1.2522; 1.2566
Sup: 1.2464; 1.2438; 1.2417; 1.2400