Cable buyers broke above key resistance levels in overnight trading
The jolt higher yesterday came after Juncker's interview (which I will get into later) and that was enough to give buyers the breakthrough they've been craving for all week.
Price broke above the stubborn 100-day MA (red line) and the 38.2 retracement level around 1.2500, with the former not having been firmly broken since May.
That says a lot about sentiment, even if it just means from a technical perspective. Essentially, sellers are no longer in control and with the near-term bias favouring buyers, the upside momentum may still run further from here.
Currently, price is trading near session highs close to 1.2580 as the pound continues to extend gains going into European trading. So, what's next?
Looking at the chart, buyers will be aiming towards the 50.0 retracement level @ 1.2670 next followed by the 200-day MA (blue line) @ 1.2738. Those will be the next two key levels to watch out for in any further upside extension.
Going back to the fundamentals though, was Juncker's remarks any different to what we have heard before? I think this was the key passage:
"I was asking the prime minister the other day to make concrete proposals as far as so-called alternative arrangements are concerned, allowing us and Britain to achieve the main objectives of the backstop. I don't have an erotic relation to the backstop. If the results are there, I don't care about it. If the objectives are met - all of them - then we don't need the backstop. It was a guarantee, not an aim by itself."
I highlighted what I find to be the most important detail of his interview. The fact that the removal of the backstop hinges on "if" the UK is able to propose something credible and different from the last three years doesn't do it for me.
There's a lot of hopeful optimism in the pound surely but has anything changed after Juncker's interview yesterday? Nope.
But as I always say, as a trader you can never argue with the technicals either. Right now, this isn't the place to pick a top in the run in cable after the break yesterday. It'll be interesting to see how much further this run still has to go based on a bunch of "ifs".
