Cable surged neat 1.27 barrier in early Europe on Tuesday, after comments of EU negotiator Barnier, who said that Brexit deal is still possible this week.
Fresh optimism shifts near-term focus higher, despite subsequent profit-taking that reversed the largest part of 1.2604/1.2697, post-news jump.
Near-term action is still holding in consolidation under new 3 ½ month high at 1.2706, where 200DMA capped last week’s strong bullish acceleration, but improved sentiment on positive Brexit expectations, keeps the pound supported.
Monday’s long-tailed daily candle marked strong downside rejection (dip found footstep at significant Fibo 38.2% of 1.2195/1.2706 support at 1.2511), adding to positive signals, along with bullish daily techs.
However, risk of pullback cannot be ruled out while the price remains below 200DMA, with repeated failures to break higher, to add to initial negative signals.
Also, optimistic tones that the Brexit deal is possible, but still not reached, would keep the downside vulnerable.
Initial support lays at 1.2635 (5 min chart higher base), ahead of session low at 1.2604 and former top at 1.2582 (20 Sep), but stronger bearish signal could be expected on firm break of 1.2511 pivot.
At the upside, 200DMA (1.2711) marks pivotal resistance, break of which would spark fresh bullish acceleration and expose targets at 1.2783 (25 June high) and 1.2835 (Fibo 61.8% of 1.3381/1.1958 descend).
Top events today are UK labor data, with earning expected to stay unchanged in Aug (4%), as well as unemployment (3.8%) while jobless claims are expected to drop (26.5K f/c vs 28.2K prev) and fresh Brexit proposal that UK negotiators will bring forward to the meeting with their EU counterparts this morning.
Res: 1.2697; 1.2706; 1.2711; 1.2783
Sup: 1.2650; 1.2635; 1.2604; 1.2582