The British Pound recovered to 1.2440 mainly due to the weak US data which increased the odds of a 50 bps rate cut by the Fed. Additionally, yesterday the UK’s House of Lords passed an amendment that limits the PM from dissolving the Parliament until October 31. If the House of commons vote on it to become a law, it will pave the way for soft Brexit expectations as the front-runner to the PM’s race, Boris Johnson, keeps repeating his pledge to leave the EU by October 31, no matter the outcome. However, traders will remain cautious as the EU’s chief Brexit negotiator has said that the UK will have to “face the consequences” if it decides to leave without a deal. In economic news, today’s UK Retail Sales numbers will have a major impact on the Cable in the short-term, a positive data could easily push the Sterling above 1.2440 towards 1.25.
The Sterling bears attempted to break below 1.24 yesterday, but the bulls were quick to jump in and save the day. Short-term momentum has shifted to the buyers’ side, as the Cable is currently testing the 1.2440 resistance level. A clean break above this level will take the Pound higher towards 1.25 and the 50-day moving average. Failure to breakout, the bears will take back control and push the price to retest the recent lows.
Support: 1.24 / 1.2365
Resistance: 1.2440 / 1.25