The British Pound collapsed more than 200 pips yesterday, sinking to 28-month low, after Boris Johnson said that “The Irish Backstop is dead”, which pushed the UK closer to a no-deal Brexit. Keeping in mind the new entrants to the British Cabinet, majority of UK Ministers are also preparing for a no-deal Brexit and pushing the EU to re-open departure talks. Market participants are currently terrified from the increasing risk of a disorderly exit as they are trying to find solace in the US Dollar. With today’s lack of macroeconomic data, the focus will remain on any Brexit headline to dictate the current market sentiment.
The Sterling started the sell-off the moment price broke below the descending wedge pattern, taking out multiple key support levels until it found some buyers around the 1.2120 area. A counter-trend move towards possibly 1.22 is very likely before the sellers resume the recent bearish momentum. If 1.2120 is broken, then 1.2050 and 1.20 will likely be their next targets. The bulls however, need to gather momentum and break above as much as resistance levels as possible to stop this recent bearish avalanche.
Support: 1.2120 / 1.2050 / 1.20
Resistance: 1.22 / 1.2250 / 1.23