At some point in the early stages this week, it seemed inevitable for cable to break lower as the Monday drop saw a daily close below 1.1800. But while price did hit its lowest levels since March 2020, the 14 July low at 1.1759 is still a key level that is holding on the daily chart as price comes back up for a bit of air amid the dollar retreat yesterday.
That said, much like the euro, there is very little to be optimistic about the pound right now. As mentioned at the start of the week:
"Considering that both central banks (Fed and BOE) already gave a formal message that we are in the second-half of the tightening cycle, the trade for cable is very much a case of 'who folds first'? The Fed or the BOE? In this instance, it looks very much like the latter.
As such, the path of least resistance is for the pair to move lower - all else being equal. Now, with the dollar picking up steam across the board, the next test is 1.1800 and the year's low at 1.1759."
We're still stuck in that phase right now but given trading sentiment this week, we might have to wait until Fed chair Powell's speech at Jackson Hole before any sudden moves in the dollar next.
