Heavy Tone Continues

Monday's general risk aversion, led by the downside correction in US equities, added to sterling's negative outlook based on ongoing Brexit negotiations this week, expected COVID-19 second wave lock down announcements and the Internal Market Bill. Chancellor Sunak expected extension to the furlough scheme provided some buoyancy in Asian trade Monday but didn't carry much weight into Europe. However, rate did manage to post a high in early Europe trade Monday of $1.2967, though held well off last week's highs around $1.3000, before it was influenced lower, found initial support at $1.2835 before it corrected to $1.2871 in early NY then came under further pressure that eased it to a low of $1.2776 during the NY afternoon. US equities pared some of their earlier losses which allowed cable to nudge back to $1.2820 before closing the day around $1.2815. Rate basically remained buoyed above $1.2800 in Asia though struggled to extend recovery above $1.2820, touching $1.2824 before turning lower again into Europe, the rate extending the intraday low to $1.2786. Moves so far seen in tandem with EUR/USD as EUR/GBP continues to cling close to its key technical 10-dma (current Gbp0.9174). Support seen at $1.2776 ahead of $1.2763. Expect some interest into $1.2750, a break to expose $1.2725/20. Resistance $1.2825/35 ahead of $1.2871. UK CBI Trends at 1100BST provides domestic data interest (more focus on Wednesday flash PMI's), more interest this morning on BOE Bailey at 0830BST.
MNI Techs: GBPUSD sold sharply Monday, reinforcing the current bearish outlook. This follows the breach on Sep 10 of trendline support drawn off the Mar 20 low. The move lower recently also resulted in a break of 1.2867, 50.0% of the Jun 29 - Sep 1 rally opening 1.2722, the 61.8% level. The pair has also stalled recently ahead of resistance at 1.3035, Sep 10 high reinforcing a bearish set-up. Clearance of 1.3035 is required to threaten the bearish mood.