Cable extends fall to fresh two-month low as key support levels start to give way
BP/USD falls to 1.2680, its lowest level since 23 July
Some modest strength in the dollar is helping to push cable lower, but the pound is still unable to get off the floor for the most part and that is also contributing to the decline in the pair to fresh lows since 23 July now.
Of note, the pair is now breaching key support levels from the confluence of the key daily moving averages @ 1.2724-26 as well as the 61.8 retracement level @ 1.2722.
That is leading to the bias in the pair turning more bearish with the drop under 1.2700 now leaving the pair vulnerable to a potential drop towards 1.2500 next.
The trifecta of bearish factors are also continuing to intensify for the pound.
Brexit talks are still going nowhere ahead of the 15 October deadline, the UK virus situation is getting worse and could lead to another lockdown, and there is mounting pressure on the BOE to pursue negative rates (lack of extended fiscal support not helping) in order to aid the economy – in spite of what Bailey may have said yesterday.
For now, keep below the technical levels above and sellers will stay in the driver’s seat in search of a move lower this week.
For buyers, they have to try and keep above that but the path of least resistance points towards a move lower unless the pound is helped out by the dollar side of the equation – which isn’t corroborating as we see EUR/USD fall below 1.1700 as well.
Source: Technical analysis