The near-term support around 1.2160-70 helped to stall the drop yesterday in the pair and we're seeing a light bounce from there again now as price climbs back up to 1.2190. The 50.0 Fib retracement level of the recent swing higher is also providing an added layer of defense but all eyes now will be on the risk mood and the dollar.
The dismal euro area PMI readings earlier brought about fresh concerns of a recession, with the ECB - in all likelihood - set to hike into one and that caused a flurry of bids into haven assets. The dollar and yen benefited, with cable dropping from 1.2235 to 1.2170.
For now, equities are paring back some losses with S&P 500 futures down 0.2% after having been down as much as 0.7% earlier. However, bonds are still bid with 10-year German bund yields down 16 bps to 1.45% and 10-year Treasury yields down 5 bps to 3.103% on the day.
Going back to the cable chart, the near-term bias is more bearish now if sellers can keep below 1.2200 and the 200-hour moving average (blue line) at 1.2204. The pressure will be on towards breaching the near-term support region highlighted above in order to go searching for a further decline towards 1.2000.
Any bounce looks to stall just above the 1.2300 level on the week with key resistance still seen closer to 1.2400.
