Sterling stands at the back foot but away from key supports as Brexit drama continues
A day after the event that markets have seen as a crucial, Brexit drama remains at the same place and without any answer on key questions: how, when and if it is possible to bring the whole story to its end.
UK lawmakers supported PM Johnson’s Brexit plan but were against his very tight timetable which requires to complete all legislative process in just three days, in parliamentary vote late Tuesday.
The EU is now in charge as the bloc leaders need to decide whether to extend 31 Oct deadline, as hopes of avoiding the worst scenario – no-deal Brexit are still alive.
The general election in the UK in order to break current deadlock is also one of possible scenarios, but for now less likely to happen.
Sterling dipped after Tuesday’s vote but found footstep and consolidating within narrow range in early Wednesday’s trading, despite reversal pattern has completed on daily chart and indicators point lower.
Strong rejection at psychological 1.30 barrier and Tuesday’s long bearish candle weigh on near-term action, but short-term bulls off 1.1958 (3 Sep low) remain intact and weekly cloud twist (1.30) attracts for renewed attack at 1.30 pivot.
Corrective pullback is seen preceding fresh upside, while dips remain above key supports at 1.2715/00 zone (200DMA / rising daily Tenkan-sen / Fibo 38.2% of 1.2197/1.3012 upleg).
Positive Brexit news could inflate pound through 1.30 pivot and rally may extend towards 1.32 zone on smooth slit, however, no fireworks to be expected as Britain will need to deal with high costs of divorce that would sour the sentiment.
Bearish near-term scenario on break of pivotal 1.27 support zone would risk dip towards 1.26, possibly to extend towards 1.25 zone on stronger bearish acceleration.
Res: 1.2898; 1.2985; 1.3000; 1.3047
Sup: 1.2840; 1.2820; 1.2786; 1.2714