The main catalyst behind the Cable selloff was the dovish twist in the BOE’s monetary policy announcement. The BOE MPC maintained the interest rates, however, two MPC members voted for a rate cut. Moreover, Governor Carney worsened the sentiment even further when he mentioned the risks of a global economic downturn and warned that a no-deal Brexit would likely result in job losses and business closures. Meanwhile, the broad-based rally on the US Dollar added more pressure on the Pound, after the US-China trade deal hopes backed risk-on sentiment, which sparked a massive rally in the Treasury yields. Looking forward, this bearish sentiment will likely continue today on the Pound unless a positive Brexit headline disrupts the market.
The Cable is possibly forming a Double-Top reversal pattern, however it will only be confirmed if price breaks below the 1.2790 neckline support, which will expose the 1.27 level for a possible retest. The bulls need to find momentum and push price higher, ideally above the 50-day moving average to invalidate this bearish pattern.
Support: 1.2790 / 1.27
Resistance: 1.2850 / 1.2930