Persistent uncertainty surrounding the future UK-EU trade relationship and fears of a no-deal Brexit, along with a muted response to UK final manufacturing PMI, had sterling stationed around multi-month lows Monday.
Technically, H4 price is capped by resistance at 1.2824 and the round number 1.28. Concerning H4 structure, the 1.27 handle is open for a test, though do bear in mind we are seeing the relative strength index (RSI) produce bullish divergence out of oversold territory.
Since the beginning of the year, weekly price has been languishing beneath long-standing trend line resistance, pencilled in from the high 1.5930. Last week, however, witnessed sellers strengthen their grip and connect with the 2019 yearly opening level at 1.2739, whipsawing through demand around the 1.2939 region (black arrow) and registering fresh YTD lows. A breach of the said support would side-line hopes of recovery and shine the spotlight on support from 1.2369.
In conjunction with the weekly timeframe, we can see price action on the daily timeframe ran into a particularly interesting area of support at 1.2769, a 127.2% Fibonacci extension at 1.2738 and the 200-day SMA. Note the said SMA has been flattening since mid-October 2019. Trend line resistance, extended from the high 1.3514, is next in line should we advance. Failure to hold at 1.2769, nonetheless, has support at 1.2524 to target, which happens to merge closely with a 161.8% Fibonacci extension at 1.2527.
Regardless of the unit clocking YTD lows last week, the combined weekly and daily supports between 1.2739 and 1.2769 is potentially enough to inspire a recovery.
Traders, however, are likely waiting for a H4 close beyond resistance at 1.2824 before considering upside free to 1.29ish. Of course, a break of the current H4 resistance, followed up with a strong retest off 1.28, is likely a preferred scenario for entry.
Disclaimer: The information contained in this material is intended for general advice only.