Cable sellers threaten to establish a more bearish near-term bias
We're starting to see a clearer trend emerge once again in cable and the pound as sellers look to be continuing their good run over the last two weeks again. Price now is starting to break below the 100-hour MA (red line) @ 1.2686 as cable hits a session low of 1.2675 after a stronger start to the day in Asia Pacific trading.
Political headwinds will stay the course for the pound as the Tory leadership contest will only get underway in the second week of June. Until then, there isn't much of a reprieve to be seen and now with the near-term chart starting to hint at an extension, we could be on course to testing last week's lows around 1.2606 once again.
The only caveat here is that this week there is potentially month-end flows to disrupt trading sentiment and make things more choppy. But given all the political fiasco from the past week and the fact that Brexit remains such a mess, the path of less resistance continues to favour the downside in my view.
But as mentioned last week, we're all trading the BoJo sweepstakes i.e. threat of a no-deal Brexit now. Ultimately, his odds of winning the Tory leadership contest will provide the clearest direction in where the pound might be headed over the next month.
That said, I reckon if BoJo is appointed prime minister, he would tone down his approach and act along the lines of Theresa May. It's one thing to be looking from the stands and taking a shot at someone, it's a whole other thing when you're the one on the stage expected to deliver a performance that satisfies everyone.
