GBPUSD, H1 and Daily
The pound has opened this week on a firm footing. Cable has lifted to near 1.3275, and the pound has forayed into one-week low terrain versus the euro while reversing a portion of recent losses seen against the yen. A fundamental underpinning for the pound stems from last week, when BoE governor Carney noted that more rate hikes will be seen if the economy develops along expected lines, while October retail sales beat forecasts. The Brexit process remains a blot on the landscape, however, with time ticking on the next deadline for the UK and EU to agree on divorcing terms. There remains little sign that an accord will be reached, not just on the final financial settlement but also the Northern Ireland border, which is starting to look like a major sticking point. Talk of a hard Brexit scenario has become ever present.
Sterling, already having about a 15% discount priced-in following the Brexit vote last year, will still remain vulnerable to negative news from this front, while UK stock markets and Gilt markets will likely remain relatively immune, assuming, that is, there isn’t a serious deterioration in negotiations to the extent that implies a realistic chance for there being a no-deal Brexit.
On a technical side, cable has been continuing a six-week oscillation of the 1.3200 level, while the last 3 weeks being bullish with a possibility of retesting 1.3320 level. However with RSI being neutral, MACD lines remaining negative, and the small daily candles seen the last week, it seems that Bulls have not really gain control in order retest the 50% Fibonacci area or even to move above that. Hence Cable is likely to great a lower high within the week. A series of daily lows that were seen between October and November, mark 1.3020-1.3050 as a key support zone.
The shorter timaframe picture agrees with the lack of upside confidence, with hourly RSI at 59, MACD lines positively configured but very weak at 0.00042. Hence intra day Short position was taken after the Tweezer Top noticed in the hourly chart and as there is a belief of a down correction in the up-channel identified since November 13 . Targets have been set at 1.3210 and 1.3195. Support was set above recent high fractal and at 1.3285 – 1.3300 area.
Nevertheless , a hold above Friday’s low at 1.3165 and a closing above 38.2 Fib level which is also ablce Friday;s high , could confirm that momentum still holds and the possibility of the price action to retest 1.3330 area.
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