Cable stayed at the back foot in Asia and extended pullback from Wednesday’s rally top at 1.2920, to fresh low at 1.2840 in early European trading. The pair is driven by contradicting news about pre-election position of two major political parties.
Release of poll that showed increasing lead of Conservatives boosted pound on Wednesday, but YouGov survey that was released on Thursday showed Tories only 3% ahead of Labour Party.
As expected, sterling is seen in choppy mode, moved mainly by political news, in the days preceding June 8 vote. Pound may fall further if Conservatives lose majority in the parliament, as suggested by the latest poll. Such scenario would weaken the position of UK PM Theresa May at the beginning of long and tough Brexit negotiations with the EU.
Alternatively, sterling would receive significant support if May keeps comfortable majority in the parliament. Technical studies show mixed setup on daily chart. Overall bulls are underpinned by rising daily cloud, but near-term recovery action from double downside rejection at 1.2770 zone was capped by strong barriers at 1.2908/20 zone, provided by converged daily Tenkan-sen/Kijun-sen lines and 10/20SMA’s.
In addition, descending thick weekly cloud (cloud base currently lies at 1.2950) continues to heavily weigh on market, after capping broader recovery rally from 1.2100.
Stronger direction signals could be expected on firm break through key near-term barriers at 1.2920/50 or supports at 1.2770 zone (lows of pullback from 1.3047 peak, reinforced by daily cloud top).
Res: 1.2889, 1.2908, 1.2920, 1.2950
Sup: 1.2840, 1.2826, 1.2800, 1.2768