The Past few weeks have been relatively torrid for the Cable as speculation continues to mount over whether the UK will ultimately exit the Eurozone. As the talk of a BREXIT has increased, so too has the bearish pressure upon the Cable. Subsequently, the question remains as to whether the pair has finally found some support above the 1.38 handle, or if a further collapse is on the horizon.
Taking a look at the Cable’s technical indicators points to a currency in a weakened state as price action continues to slide lower. In extension, price remains firmly below the 100-Day Moving average with little chance of rising back above the 1.45 range. MACD is also steadily trending lower, giving some credence to the argument that the pair is facing further falls ahead. However, RSI has just reached into over-sold territory and this could be signalling the need for a pullback ahead of the resumption of the bear trend.
Further supporting the downside view is the recent commitment of trader’s report that shows a range of mounting short positions against the pair. It would appear that the last week has seen a significant rise in the amount of speculation over the potential direction of any BREXIT vote.
However, any further depreciation against the US Dollar will need to breach a few key support areas to cement a move lower. In particular, any bearish activity will firstly face the 29th of February low of 1.3834 and then potentially the Fibonacci extension at 1.3750. If those two key points are breached, a potential slide towards the 1.35 handle could be on the cards.
Unfortunately, the current price level brings with it a significant amount of risk for unwary traders. The current Risk/Reward ratio is unfavourable and it would therefore be more prudent to wait for a pullback towards resistance around the 1.4000 handle, before looking to re-enter short. Subsequently, look to sell a bounce from around that resistance level or a downside break of 1.3834, with either scenario being highly likely in the coming session.
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