Price action is still sandwiched between key near-term levels
Overnight headlines proved to be rather poor for the pound with government talks with DUP believed to be going nowhere and UK speaker John Bercow stating that May can't put her deal to a meaningful vote for a third time unless changes are made to the deal since the second vote seen last week.
Cable dipped just under 1.3200 on the headlines but recovered as buyers kept the near-term bullish bias going by holding above the 100-hour MA (red line) shortly after. Once again, bids and the near-term support levels were enough to stem off a sharp decline in the pound for the time being.
As it stands, the pound trade remains more of a binary outcome trade with traders having to weigh odds of a no-deal Brexit down the road and that of a long extension before some reconsideration towards possibly moving to a second referendum.
Given the myriad of possible permutations, there is still plenty of uncertainty as to how this could all play out. That said, majority of the options are starting to lean towards something more positive for the pound i.e. long Brexit extension or May somehow winning a third meaningful vote.
A no-deal outcome is still unlikely - but must not be ruled out - at this juncture and that is well-reflected in the pricing of the pound. The quid remains the best performing major currency over the past month and more positive Brexit headlines could just help cable start to soar in the coming days/weeks.
It looks almost certain that things will go down to the wire now so expect more uncertainty and choppy trading to come this week. The 1.3300 handle should keep a lid on price action today with a decent amount of expiries resting at 1.3290-00. Meanwhile, downside should be kept limited by the 1.3200 handle and also hourly support from the 50.0 retracement level @ 1.3216 - which has continued to prove pivotal over the past week.
