The pound recovers a bit of ground after its earlier fall
It is no dead cat bounce just yet but merely a mild retracement on short covering/profit taking. Cable has climbed back up to near 1.2170 after the earlier drop to a low of 1.2119.
While promising, it’s hardly worth anything as buyers will have much more work to do in order to even try and justify any upside momentum. The first step is getting back above the 1.2200 handle and the 23.6 retracement level @ 1.2213.
Even then, I reckon sellers will be waiting to pounce as long as the Brexit rhetoric continues to be as negative as it is currently for the pound.
In the bigger picture:
The pair is still looking towards support from the March 2017 low @ 1.2110, which also coincides with the weekly trendline support seen above at the same level. That will be the key spot to watch towards the downside this week.
At the same time, it could also be an area for sellers to take further profits off the table considering how stretched short positions are at the moment. That said, as long as the Brexit rhetoric remains unchanged during the summer, the path of least resistance (as the charts would suggest as well) is lower for the pound.