Cable eases from new recovery high at 1.2273 in early Friday’s trading, following 1.04% rally on Thursday, when sterling was inflated by fresh Brexit optimism on Germany’s Merkel comments about possible solution for Irish backstop. Bullish signals were generated on Thursday’s break and close above 20DMA (1.2144) and Fibo 38.2% of 1.2522/1.2015 (1.2208), but fresh bulls need weekly close above these levels to stay in play. Overall picture is bearish and sees current action as positioning for fresh weakness, with news from Brexit and today’s speech of Fed Chairman Powell, expected to be the main drivers. Dovish tone from Fed chief would sent dollar higher and increase pressure on sterling, with return and close below 20DMA, to confirm bears regaining control and increase risk of retesting key 1.20 support zone. On the other hand, if Powell signals that the Fed is embarking prolonged easing cycle, sterling may extend recovery from 12 Aug new low at 1.2015.
Res: 1.2244, 1.2268, 1.2285, 1.2328
Sup: 1.2194, 1.2174, 1.2135, 1.2108
