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Cable stands at the back foot in early Tuesday's trading after recovery attempts were capped by falling 10SMA/Fibo barrier and subsequent easing resulted in daily close in red and below falling 5SMA that added to negative signals.

Bearish momentum reinforces negative outlook and keeps key supports at 1.26 zone at risk.

Sterling remains heavily weighed by political turmoil in the UK on deep division of leading parties over Brexit that keeps risk of extension of larger downtrend from 1.3381 (2019 high).

Governing Conservatives want to continue to follow through on plans to exit the EU, while opposition Labor Party sees scenario of new election or second Brexit referendum as a way to reunite the country, after both parties were defeated on EU elections.

Brexit saga is expected to remain a main driver of sterling and markets will be closely watching the situation.

Key technical points to be focused are 1.2600 zone on the downside and 1.2716/47 (10SMA/Monday's high) with break of either side to generate initial direction signal.

Loss of 1.26 support zone would signal bearish continuation and expose target at 1.2479/76 (11/12 Dec double-bottom).

Conversely, sustained break above 10SMA/Mon high would put bears on hold for further recovery, but close above 1.2824 (Fibo 38.2% of 1.3179/1.2605) will be required to signal reversal.

Res: 1.2702, 1.2716, 1.2747, 1.2810
Sup: 1.2662, 1.2647, 1.2605, 1.2580

Italian Deputy Prime Minister Matteo Salvini said today that European Commission could impose a EUR 3B penalty on the country, for breaking EU fiscal rules. This is in line with other reports that the Commission is ready to start disciplinary steps against Italy on June 5. The actions will likely be confirmed should the Commission send a warning letter to Rome this week.

Salvini said, "let's see if we get this letter where they give us a fine for debt accumulated over the past and tell us to pay 3 billion euros." He also pledged earlier, after his far-right League party triumphed in European elections on Sunday , to use "all my energies" to fight his perceived outdated and unfair European fiscal rules.

Pivot (invalidation): 58.50

Our preference Long positions above 58.50 with targets at 59.90 & 60.45 in extension.

Alternative scenario Below 58.50 look for further downside with 58.20 & 57.85 as targets.

Comment The RSI is bullish and calls for further upside.

Pivot (invalidation): 14.6100

Our preference Short positions below 14.6100 with targets at 14.4900 & 14.4400 in extension.

Alternative scenario Above 14.6100 look for further upside with 14.6400 & 14.6800 as targets.

Comment The RSI is bearish and calls for further downside.

Pivot (invalidation): 1286.50

Our preference Short positions below 1286.50 with targets at 1280.50 & 1277.00 in extension.

Alternative scenario Above 1286.50 look for further upside with 1289.00 & 1291.50 as targets.

Comment The RSI is bearish and calls for further decline.

Germany GfK consumer confidence for June dropped to 10.1, down from 10.2 and missed expectation of 10.4. That's also the lowest level in more than two years. GfK noted that following a period of stability, the consumer climate was forced to take a small hit once more.

In particular, the steep downward spiral of the economic outlook has continued. The indicator dropped -1.3 to 1.7. It lost almost 32 points within just a 12-month period. GfK added, "The global cooling off of the economy, the endless discussions around Brexit, and the risk of an escalation of the trade conflict with the USA have also put a noticeable brake on the economic outlook of consumers. Persistent trade conflicts pose a particular threat to the export nation of Germany. Weak periods of economic activity have a similar effect on export markets."

Full release here.

Also from Germany, import price rose 0.3% mom in April, below expectation of 0.5% mom.

Pivot (invalidation): 2820.00

Our preference Long positions above 2820.00 with targets at 2837.00 & 2851.50 in extension.

Alternative scenario Below 2820.00 look for further downside with 2805.50 & 2791.00 as targets.

Comment The RSI is mixed to bullish.

Pivot (invalidation): 11990.00

Our preference Long positions above 11990.00 with targets at 12130.00 & 12170.00 in extension.

Alternative scenario Below 11990.00 look for further downside with 11930.00 & 11845.00 as targets.

Comment The RSI is mixed and calls for caution.

Pivot (invalidation): 6.0540

Our preference Long positions above 6.0540 with targets at 6.0990 & 6.1280 in extension.

Alternative scenario Below 6.0540 look for further downside with 6.0390 & 6.0200 as targets.

Comment The RSI calls for a new upleg.

Pivot (invalidation): 0.6910

Our preference Long positions above 0.6910 with targets at 0.6925 & 0.6940 in extension.

Alternative scenario Below 0.6910 look for further downside with 0.6900 & 0.6890 as targets.

Comment Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.