The cable entered the week strongly under pressure as continued selling post-Brexit was still evident on Monday. Subsequently, the pair was under pressure early but eventually recovered somewhat before plunging back below the 1.33 handle late in the week.
The UK’s next step still remains unclear given that the latest rhetoric is now posing the question as to whether a general election is now needed. Subsequently, a review of the past week and what lays ahead would appear highly salient.
The cable largely remains under the grips of a post-Brexit fever as the pair continues to react to rhetoric from both sides on the prospective implementation of the referendum outcome. Monday saw some sharp selling following the vote, which formed a new low below the 1.32 handle, but the pair ultimately reversed and rallied before again falling back below the 1.33 handle late in the week.
Even the UK Manufacturing PMI result, which came in above forecasts at 52.1, was unable to assail the fall. Subsequently, the cable ended up largely where it started the week, trading around the 1.3267 mark.
The week ahead is likely to provide plenty of volatility given the ongoing uncertainty around the Brexit process. The latest rhetoric from Nick Clegg also poses a problem for both camps given that he is now calling for a general election on the issue which would mean that there is little certainty for financial markets moving forward.
On the fundamentals front, the US Non-Farm Payroll and UK Services PMI figures are due out and are also likely to add to the volatility.
From a technical perspective the pair remains relatively depressed and without a strong trend direction. However, the pair appears to have formed a temporary low whilst converting to largely a sideways direction which may indicate that the immediate collapses following the Brexit have now ceased.
In addition, RSI appears to have clawed its way out of oversold territory and also appears to be trending sideways. Subsequently, our bias remains largely neutral given the uncertainty still present following the Brexit as well as price actions current sideways direction. Support is currently in place for the pair at 1.3243, and 1.3150. Resistance exists on the upside at 1.3486, and 1.3534.
Ultimately, until a strategy is developed and communicated as to how the UK government plans to move ahead with a Brexit, the volatility and uncertainty will continue. However, it appears that there is currently an abject leadership gap within the UK and this means that there isn’t likely to be any firm decisions made anytime soon.
Subsequently, I firmly expect the cable to remain depressed in the days ahead and perhaps even see another concerted attempt at breaching the 1.32 handle.