Sterling rallied 0.5% in Asia/early Europe on Wednesday, in extension of Tuesday’s rebound from sub-1.20 levels, driven by fresh Brexit optimism. UK parliament’s vote on Tuesday opened way for another Brexit delay, with rising opposition attempting to stop no-deal Brexit scenario. Weaker dollar after disappointing US manufacturing data helped fresh recovery of British pound. Daily chart shows formation of reversal pattern after bullish Hammer was left on Tuesday and subsequent extension higher attacked pivotal 20DMA barrier (1.2143), also marking over 50% retracement of 1.2309/1.1958 bear-leg. Fresh bullish momentum and north-heading stochastic (after reversal from oversold territory) support the notion. Bullish close above 20DMA today is required to generate fresh positive signal for further recovery and test of next pivot at 1.2176 (Fibo 61.8%) to confirm reversal on break. Failure to clear 20DMA would keep the downside vulnerable and reduce possibilities of stronger recovery. Solid supports at 1.2100 zone (4-hr 20DMA/broken Fibo 38.2% of 1.2309/1.1958) need to hold and keep alive hopes of recovery, while firm break lower would increase risk of renewed attack at cracked key 1.20 support zone.
Res: 1.2157, 1.2175, 1.2188, 1.2232
Sup: 1.2134, 1.2104, 1.2076, 1.2035
