Pound extends weakness on Wednesday, weighed by Brexit talks and risk aversion
Cable fell to one-week low in early Wednesday in extension of Tuesday’s 1% drop (the biggest one-day fall since 10Sep).
Fresh risk aversion on pause of new Covid-19 vaccine trial and no signs of progress in talks about US stimulus deflated sterling, as the currency came under increased pressure after Irish minister said on Tuesday he doesn’t see any breakthrough in Brexit talks this week.
The pound was also affected by negative UK labor data, possibility that the Bank of England would impose negative interest rates and renewed restrictions to combat a fresh wave of coronavirus infections.
Investors keep an eye on ongoing Brexit negotiations with focus on meeting between UK PM Boris Johnson and European Commission President Ursula von der Leyen due later today.
The EU wants more concessions from Britain before entering a last, intense phase of negotiations, as talks inched towards a deal but still facing strong obstacles.
Fresh weakness broke below pivotal support at 1.2926 (Fibo 38.2% of 1.2675/1.3082 upleg) and round-figure 1.2900 support on Wednesday, after bearish acceleration on Tuesday surged through psychological 1.30 support.
Formation of reversal pattern on daily chart and Tuesday’s massive bearish candle weigh on near-term action, in addition to weakened daily technical studies.
Rapid loss of bullish momentum and south-heading RSI and stochastic add to negative tone as bears dented next key support at 1.2866 (daily cloud base).
Firm break below cloud base would boost negative signals, with extension through 1.2830 pivot (Fibo 61.8% of 1.2675/1.3082) to confirm top at 1.3082 and open way for further weakness.
Broken 10DMA (1.2944) caps today’s action and marks solid resistance and guards pivotal 1.30 barrier.
Res: 1.2885; 1.2926; 1.2944; 1.3000
Sup: 1.2845; 1.2830; 1.2771; 1.2708