Cable rebounded above its Friday high in making a peak of 1.3125, putting in some space from the one-month low at 1.3027.A broader ebb in the dollar since Friday’s unexpected decline in U.S. jobs has supported the pair. Last week was the biggest down week the pound has since August 2016. Today, Sterling rallied while the dollar weakened versus most other currencies in this early week trading. Trading conditions have be thin in the absence of Japan, and other centres, and with the Canada and the U.S. observing holidays today. There has been a wariness in trading, too, given reports that Pyongyang is preparing another missile launch, the on-the-boil Catalan independence movement, and amid a diplomatic spat between the U.S. and Turkey. The pound was lifted by the UK’s ONS stats office having disclosed an error in estimated companies’ costs which has led to an understatement of inflation.
The pound is showing an average 0.7% gain versus the G3 currencies. However even with the break of the intraday resistance at 50-Day MA, at 1.3130, cable remains in a bearish channel. Significant is the 1.3200 – 1.3240 area since only a break above this area might alert a possible bullish movement. More precisely, this area is a confluence of different technical tools. The 1.3200 level represents the 200-period MA in the 4-hour chart. Meanwhile, in the Daily chart, the 1.3220 level represents the confluence of a downtrend line taken since the peak seen on September 20, and also the 50.0 Fibonacci level drawn since pair’s bottom on August 24.
If the pair manage to reach and break the 50.0 Fibonacci level then this means that has covered the half way of August’s rally. Hence that level can either provides a strong resistance level and a retracement again downwards OR a divergence level on the upwards if of course price confirms a strong break above this area.
Therefore, despite Cable’s rally on news and on the anticipation of P. Minister May speech, the general picture is still bearish, with the high levels that might seen today to be consider as possible selling signals. Only a break above 1.3240 but more accurately above 1.3300 key level , could be consider as a sign of trend reversal, since the strong downtrend still holds.
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