Cable ticked lower in early European trading, after narrow-range trading in Asia on Monday, but remains at the back foot following Friday’s 0.9% fall after repeated rejection at psychological 1.30 barrier.
Sterling was hit by weak UK retail sales data on Friday which added to Brexit uncertainty, ending day firmly in red and generating negative signals on formation of bearish outside day pattern and daily close below 100SMA (1.2892).
Fresh extension lower penetrated daily cloud (cloud top lays at 1.2866) and cracked 10SMA (1.2840), also top of rising 4-hr cloud, which is narrowing and could attract bears, showing scope for test of next pivotal support at 1.2800 (Fibo 38.2% of 1.2476/1.3000).
Momentum and slow stochastic on daily chart created bear-crosses and head south, supporting negative scenario.
Also, last week’s close in long-legged Doji signals strong indecision and suggests that recovery off 1.2476 low might be running out of steam.
Negative near-term sentiment is maintained by Brexit concerns as PM May is due to reveal the ‘plan B’to the UK parliament later today, after her proposal for Brexit was heavily defeated last week.
Several scenarios over Brexit are on the table, but rising uncertainty is expected to keep sterling under pressure.
Sustained break below 1.2800 Fibo support would signal deeper pullback and expose 1.2735 (daily cloud base / 50% retracement of 1.2476/1.3000).
Only return and close above daily cloud top would ease bearish pressure, but lift above 100SMA is needed to neutralize.
Res: 1.2866, 1.2892, 1.2953, 1.3000
Sup: 1.2800, 1.2781, 1.2758, 1.2735
