Signals of bullish continuation require break above 1.30 to be confirmed
Cable maintains positive tone and extends advance to new over two-week high in early European trading on Monday, following 20-pips gap higher Monday’s opening.
Sterling was boosted by fresh opinion polls pointing to Conservative victory at the 12 Dec election and comment from PM Johnson who said that all Conservative Party candidates will support his Brexit plan.
Weaker US dollar on optimistic tones from US/China trade talks but without clearer signal when the deal would be reached, adds to pounds strength.
Monday’s rally broke above bear-trendline off 1.3012 high (21 Oct) and emerged above thin weekly cloud (after the action of past five weeks was capped by cloud base), generating bullish signal for renewed attack at key 1.30 resistance zone.
Completion of bullish flag on daily chart signals further advance, but confirmation of bullish continuation requires break and close above 1.30 zone that would open targets at 1.3045 (Fibo 76.4% of 1.3381/1.1958) and 1.3100 (round-figure resistance).
Bullish daily studies support scenario, but overbought stochastic warns that bulls may face strong headwinds at 1.30 zone and take a breather before breaking higher.
Broken trendline (1.2917) should ideally keep the downside protected, while deeper dips would put immediate bulls on hold for test of pivotal supports at 1.2871/61 (converging 20/10DMA’s).
Only firm break here would sideline bulls and risk extension towards key supports at 1.2788/68 (24 Oct / 8 Nov lows).
Res: 1.2975; 1.3012; 1.3045; 1.3100
Sup: 1.2917; 1.2908; 1.2871; 1.2861