Cable regained traction and quickly recovered from half a cent dip on announcement of the day of Theresa May’s resignation and regained levels above 1.2700 handle.
May’s announcement that she will resign as Prime Minister on 7 June opens a number of Brexit scenarios that would have strong impact on sterling.
Near-term action maintains positive tone, boosted by surprise from UK retail sales data which came better than expected (Apr m/m 0.0% vs -0.3% f/c / y/y 5.2% vs 4.6% f/c) and supports recovery attempts.
Fresh advance improves possibilities for reversal pattern formation on daily chart that would open way for stronger corrective action and offer better opportunities to re-enter larger bearish market.
Fresh bulls face initial barrier at 1.2740 (Fibo 23.6% of 1.3179/1.2605) but would feel more comfortable on break and close above falling 10SMA (1.2766) that would open way for test of pivotal barrier at 1.2824 (Fibo 38.2%).
The picture will be clearer after markets digest the news of PM May’s resignation and get more details about the steps of her successor.
No-deal Brexit remains as very possible scenario and pound will be hit in this case.
Scenario that includes general election would have mixed impact, depending on various factors, while pound would rally strongly on no-Brexit scenario.
Res: 1.2717; 1.2740; 1.2766; 1.2824
Sup: 1.2690; 1.2652; 1.2605; 1.2580