Larger bears are pausing above new multi-month low, after sterling fell 4.3% in April, suffering the biggest monthly loss since June 2016.
Sterling bounced after failing to register weekly and monthly close below cracked pivotal Fibo support at 1.2494 (61.8% of 1.1409/1.4249), due to oversold conditions and expectations for fresh signals from the Bank of England’s policy meeting this week.
Technical studies are in full bearish setup on daily chart, with oversold indicators suggesting a pause in the latest steep fall, however more hawkish than expected BoE could spark stronger recovery.
The central bank is expected to raise rate by 25 basis points to 1%, with hawkish outlook for the coming months, to be supportive for pound.
On the other side, traders remain cautious, as the central bank is stuck between high inflation and weak economic growth prospects, that may soften the central bank’s tone and put sterling under fresh pressure.
Expect signals on clear break of 1.2494 Fibo level that would risk fresh acceleration towards targets at 1.2251 (29 June 2020 trough) and 1.2080 (Fibo 76.4%).
Conversely, bullish acceleration through falling 10DMA (1.2737) would sideline downside risk and signal stronger recovery.
Res: 1.2614; 1.2697; 1.2737; 1.2829.
Sup: 1.2539; 1.2494; 1.2400; 1.2359.
