Cable ranged around 1.3450-70 before slipping to 1.3415 and is now just above that in early morning trade
50 pips here and there feels like nothing considering the pair made gains of almost 350 pips earlier in the day when taking a peek above the 1.3500 handle.
Since then, price action has been rather choppy as the pound lingers near the "lows" since digesting the election result. So, let's see what the technical picture is saying (⬆️).
Essentially, it points to cable running into a confluence of key resistance levels:
1) 61.8 retracement level @ 1.3453
2) Trendline resistance level @ 1.3475
3) Key psychological resistance @ 1.3500
Of note, price is also sitting in between two key large option expiries rolling off later today as well. One is at 1.3400 (£1.4 billion) and another is at 1.3450 (£1.0 billion). That may also factor into the push and pull we're seeing in the pair today.
Considering the above, for buyers to build on any further momentum to the upside, they need to hold a break above the key resistance levels pointed out above.
By doing so, it opens up a good look towards 1.3800 potentially - especially if the Brexit deal is quickly pushed through parliament and trade negotiations can begin.
Looking further out though, the outlook remains more complicated. On the one hand, the pound may see better fundamentals from improved business confidence and investments but as it creeps higher it threatens lower inflation and may require the BOE to act in order to curb weakening price pressures - which we are already seeing.
Then, you also have to factor in the possibility that trade negotiations with the EU may be more complicated and could extend beyond the transition period. That raises the risks of a no-deal Brexit if Johnson is adamant to want to leave by the end of next year.
