Cable stands at the back foot in early Monday’s trading and showing scope for deeper pullback, following last week’s double rejection at falling 55DMA (currently at 1.2326) and under the base of falling and thickening daily cloud (1.2353), which produced significant headwinds and temporarily stopped strong rally from 1.1958 (3 Sep spike low).
Fading bullish momentum and stochastic reversing in overbought zone on daily chart, support scenario, with falling daily cloud adding to near-term pressure on sterling.
On the other side, near-term bullish bias exists and current pullback would be seen as positioning for fresh upside while holding above significant supports at 1.2209/02 (rising 10DMA / Fibo 38.2% of 1.1958/1.2353 upleg) and 1.2180 (rising 20DMA).
Break and close below pivotal 20DMA would sideline bulls and risk deeper correction towards 1.21 zone (Fibo 61.8% of 1.1958/1.2353 lays at 1.2109).
Fresh pressure on pound comes from media report on Sunday about PM’s Johnson attempts to legally stop Brexit extension if no deal is agreed that adds to Brexit uncertainty, along with comments from France that the EU would not grant Britain an extension beyond 31 Oct deadline, while Ireland supports scenario of Brexit delay in order to avoid risk of damaging Northern Ireland peace process and damage to its economy.
Traders await release of a batch of economic data from the UK, due today, with focus on GDP and Industrial Production.
Res: 1.2260; 1.2290; 1.2326; 1.2353
Sup: 1.2209; 1.2202; 1.2180; 1.2155