Cable fell below its 100-day moving average in trading yesterday
The near-term price action continues to favour sellers as price now moves close to the 1.2900 level and also broke back below the 100-day MA (red line) in trading yesterday.
For now, buyers can still lean on support from the year's low at 1.2872 but a break below that will see little in the way of a potential move towards 1.2800 next.
Looking ahead today, the key risk event for the pound is the UK retail sales data release. Expectation is for a rebound after the poor December figures but even on a beat, I reckon the pound will struggle to keep gains going into the PMI releases tomorrow.
Topside momentum is likely to be capped near the 100-day MA @ 1.2955 (some charts may be around 1.2935-50) with the 100 and 200-hour moving averages next @ 1.2982-98.
Unless retail sales data today and PMI data tomorrow align for the pound, it is still leaning towards a sell-on-rallies play ahead of the weekend - despite the fact that the pound is starting to feel more and more undervalued.
But the issue is that there just isn't a solid catalyst to get any upside momentum going. Not least with post-Brexit trade negotiations still in a tricky spot at the moment.
