Eric Theoret, FX Strategist at Scotiabank, noted the near term bearish outlook on Cable and sees resistance emerging around 1.3420.
“GBP is weak, extending its recent decline to a fresh one week low. Local media are reporting of a potential plan to replace PM May before Christmas, and prospects of a Brexit deal remain distant with ongoing negotiations centered around the Irish border issue. Agreement is needed ahead of next week’s EU summit (Dec 14/15). Risk reversals are suggestive of renewed demand for protection against GBP weakness. Fundamental domestic risk lies with Friday’s industrial production and trade data”.
“GBP has bounced off of anticipated support at 1.3320 however the broader technical picture remains bearish. Momentum indicators are threatening a push into bearish territory and DMI’s appear poised to provide confirmation. Additional support is limited between 1.3320 and 1.3220. Resistance has been observed at 1.3420”.