Cable dropped on Wednesday morning on softer than expected UK November inflation, losing around 0.4% after data release.
Stronger than expected drop in consumer prices adds support to rate cut scenario, making pound less attractive, though latest comments from BOE’s deputy governor about keeping restrictive policy for some time, may partially offset impact from inflation report.
Fresh weakness is on track to fully reverse Tuesday’s advance (the pair was up 0.65%) and challenge pivotal supports at 1.2636/31 (converged 10/20DMA’s).
Near-term bias is expected to remain with bulls while the these supports hold (daily studies show MA’s in bullish configuration and 14-d momentum in positive territory) and keep in play scenario for renewed probe through cracked Fibo barrier at 1.2919 (61.8% of 1.3141/1.2037) and possible acceleration towards pivotal 1.2800 zone.
Conversely, firm break of 10/20DMA’s would weaken near-term structure and risk deeper pullback towards key supports at 1.2510/00 zone (200DMA / Dec 8/13 higher base).
Res: 1.2719; 1.2761; 1.2800; 1.2818.
Sup: 1.2631; 1.2589; 1.2556; 1.2500.
