Sellers still in control, further downside still on the cards
Continuing from this post last week. Since that post, cable is down by more than 200 pips as I type this. It's been a rather straightforward trade in the pair. At the time, the pair was forming lower highs and lower lows - a pattern suggestive of further downside.
To make matters worse, the pattern broke. But it broke to the downside and that has led to a sharp fall over the last few days. The short-term focus for the pound remains on Brexit and with comments like these overnight, it's not going to ease the recent worries of a possible no-deal Brexit outcome from coming to fruition.
Meanwhile, the dollar continues to be moving along just fine with the dollar index having touched a fresh 13-months high in trading today. And the divergence in sentiment (dollar flows also helped by Turkish situation) continues to push cable lower.
The next support level for the pair comes around the 1.2630-40 levels (June lows) followed by the 1.2600 handle and then the 21 June low @ 1.2589 comes in.
Again, I see no other way to play cable right now apart from rally-selling as mentioned since last week. Economic data may be decent or positive this week, but it's not the main focus of the market now. If it is to overshadow worries about a no-deal Brexit, then the good news from data will have to be way-beyond belief. And yesterday's wages data surely won't cut it.
The near-term chart continues to show that sellers are still in-charge right now. There was a bit of nerves tested when the UK jobs report was released yesterday but the firm hold at the 100-hour MA (red line) continues to suggest that the momentum is still to the downside for cable.