The British Pound dropped yesterday in reaction to reports that Brexit talks between Britain and the EU were close to breaking down. German Chancellor Angela Merkel told British PM Boris Johnson to keep Northern Ireland in the EU customs union and that a deal was overwhelmingly unlikely. This was followed by the European Council President Donald Tusk’s tweet, saying that the UK PM is playing a stupid game. Furthermore, the Sterling was further pressured by a pickup in the US Dollar demand after the US decided to impose visa restrictions on Chinese officials, together with the blacklisting of Chinese firms over the treatment of Muslim minorities, threatened to derail US-China trade talks. Moving forward, the UK political/Brexit-related headlines might continue to act as the main driver of the pair's momentum amid absent market moving economic releases from the UK.
The Cable sold off yesterday and found temporary support around 1.22. The bearish bias is back in this market as price is trading below both the 50 and the 200-day moving averages. If the bears gather momentum and were able to push price below 1.22, then 1.2150 will likely be their next target. In case the bulls successfully defend 1.22, then a bounce towards 1.2270 will be a likely scenario.
Support: 1.22 / 1.2150
Resistance: 1.2270 / 1.23