Near-term range is narrowing in expectations of UK election results
Cable eases on Tuesday following repeated failure to close above 1.2900 barrier, with fresh weakness being sparked by news about narrowing lead of Conservative Party over Labor Party ahead of UK election on 12 Dec.
Near-term action is holding in narrowing range as traders look for fresh political signals.
Pound was lifted on Monday by comments from PM Johnson who promised Brexit before Christmas if Tory wins the election.
The advance of past nearly four months from 1.1958 low showed signs of stall at psychological 1.30 barrier as traders were long on expectations eventual finalization of Brexit deal, but now stand aside, awaiting results of election and government’s further steps.
Tory’s victory, which is so far widely expected and likely to lead towards the end of long Brexit saga, may not lift pound at the pace many market participants expect, as sterling rallied around 8% in past couple of months and post-election relief rally might be short-lived (as most of reaction of election result is already priced in) before traders decide to take profits.
Additional pressure on pound could be expected on fears of Brexit consequences on the UK economy.
Alternative scenario on Labor Party election victory would sent sterling sharply lower.
Near-term action faces strong headwinds from bear-trendline off 1.3012 peak (which caps the action of past three days) and thin weekly cloud (limits the upside for the seventh straight week) and firm break here would re-expose key 1.30 resistance zone.
Fibo 23.6% level marks initial support at 1.2820, followed by 1.2768 (8 Nov low), which guards kay support at 1.2700 (200DMA / Fibo 38.2% of 1.2197/1.3012 bull-leg).
Res: 1.2903; 1.2928; 1.2969; 1.2984
Sup: 1.2850; 1.2820; 1.2768; 1.2700