Sterling rallied 0.8% in Asia on Thursday and extends recovery rally from ten-week low at 1.2695, driven by renewed optimism over Brexit talks, after media report that UK PM May reached deal with the EU on financial services.
Brexit theme remains pound’s key driver, as recent pessimism after UK/EU talks stalled, pushed sterling lower across the board.
Fresh rally threatens to more seriously dent larger bears, as recovery rally hit one-week high at 1.2883 and cracked important barrier at 1.2870 (falling 10SMA) and eyes another pivotal barrier at 1.2910 (Fibo 38.2% of 1.3257/1.2695 fall).
Sustained break here would generate reversal signal and turn near-term focus higher. Improving daily techs support the notion, as momentum turned north and attempts to create bull cross and slow stochastic trend higher after reversal from oversold territory, showing a plenty of space for recovery extension. Close above 1.2910 pivot would open strong resistances in 1.2980 / 1.3000 zone (daily cloud base/psychological barrier, reinforced by converging 20/55SMA’s). BoE is widely expected to keep the policy unchanged on today’s meeting, but little impact from cb’s decision could be expected as positive Brexit news overshadow the event. It will be also interesting to see cable’s weekly close, as current action is shaped in weekly hammer which could be strong reversal signal and undermine month-long downtrend from 1.3257. However, a number of events are due today / Friday and cleare picture could be expected after release of US NFP data.
Res: 1.2910, 1.2921, 1.2976, 1.3000
Sup: 1.2870, 1.2828, 1.2764, 1.2695
