Reaction on court rule was so far below expectations and downside remains at risk
Cable regained traction and tested again 1.2500 barrier in early US trading, following mild initial reaction on UK Supreme Court’s verdict that PM Johnson’s suspension of parliament was unlawful.
Fresh bulls need sustained break above 1.25 handle (after recent attempts failed to sustain break higher) to improve sentiment and shift focus higher.
Initial concerns after sterling failed to react according to expectations and make stronger rally on positive signal from court decision, are still alive and would keep in play risk of further weakness.
This signals that court decision was a minor event (despite expectations for strong market reaction) and traders fear more negative impact from economic damage made by prolonged Brexit stalemate which could be as negative as no-deal Brexit scenario.
Daily momentum and stochastic continue to trend lower, but daily Ichimoku studies are bullish and offsets negative signals for now.
Failure to clearly break above 1.25 pivot would keep the downside vulnerable for repeated attack at 1.2399 (top of thick daily cloud) which marks very strong support and break here would weaken near-term structure and risk further easing.
Conversely, close above 1.25 barrier would improve near-term outlook on formation of daily bullish engulfing and open way for further advance.
Extension and close above last Friday’s peak at 1.2582 will be required to confirm scenario.
Res: 1.2502; 1.2526; 1.2558; 1.2582
Sup: 1.2445; 1.2412; 1.2399; 1.2343