The Sterling surged yesterday as Boris Johnson took over and revamped the British Cabinet on the first day of his role as a Prime Minister. Interestingly, the key common characteristic of the new Cabinet leaders is their full-on support for a hard Brexit. PM Johnson also reiterated his pledge to leave the EU by October 31 with “no ifs, no buts”, which in-turn highlights the risk of a no-deal Brexit should the regional leaders avoid changing previous conditions. On the other hand, the EU officials applied pressure on the UK PM on his first day, by sending a letter of congratulations and asking Mr. Johnson to define his Brexit plan in detail. The overall market sentiment leans more towards the bearish side as Brexit uncertainty remains the main issue, thus we could see the Cable under pressure in today’s session.
The Pound bulls broke above 1.2450 and attempted to break the 1.25 resistance level yesterday, which is also the bearish trend line connecting the lower-highs since June 25, but the bears were able to stopped the bullish momentum. If 1.25 remains protected by the sellers, we could see the Sterling rolling over and retesting 1.2450 and 1.2420. However, in case the bulls successfully broke above the 1.25 key resistance level, we could see potentially see a trend reversal to the upside.
Support: 1.2450 / 1.2420
Resistance: 1.25 / 1.2550