Cable is consolidating under the pivotal Fibo barrier at 1.3580 (38.2% of 1.3833/1.3424) which capped Monday’s 0.63%advance.
Pound regained ground after a strong fall last week, sparked by BoE surprise decision to stay on hold, despite many were expecting the first rate hike after a pandemic.
Fresh strength was sparked by Monday’s hawkish comments from Governor Bailey who said BoE will act on interest rates if inflation risks grow further.
Monday’s rebound formed a reversal pattern on the daily chart, which still looks for confirmation on a firm break above 1.3580 pivots.
This would open the way for recovery extension towards 1.3621/28 (daily cloud base/50% retracement/10DMA) and unmask a lower top at 1.3692 (also converged 20/55DMA’s). Daily structure slightly improved on the latest rally, although studies are still in a bearish setup that requires caution.
Repeated daily close below 1.3580 would be an initial warning, however, return below 1.3520 (broken Fibo 23.6%) would confirm recovery stall and bring bears fully to play.
BoE policymakers are due to speak later today and markets will focus on their remarks for fresh signals.
Res: 1.3580, 1.3628, 1.3677, 1.3692.
Sup: 1.3547, 1.3520, 1.3500, 1.3450.
