Sterling Picks up Demand into Europe

Cable again met stiff headwinds above $1.3000, the rate Tuesday managing to stretch back to its Sep16 high of $1.3007 before it retreated, touching a pre NY low of $1.2917. (Sterling seems to need definite Brexit trade negotiation progress for it to find upside escape velocity above $1.3000). Rate recovered to $1.2986 before risk was given a general knock as US Trump tweeted that he was ending fiscal stimulus initiatives until after the Nov election. Cable dropped to an eventual low of $1.2867, closing at $1.2875. A faltering start in Asia saw rate edge to $1.2890, dip to $1.2869 before risk off was given some reprieve by further Trump tweets suggesting he was open to initiatives to prop up certain industries(airlines mentioned), small businesses as well as further payroll checks. Cable edged back to $1.2890 before early Europe gave it the added lift which took to $1.2905, currently trying to build on this move at writing. EUR/GBP meantime is holding a tight range around its key 10-dma, currently at Gbp0.9101 and not providing any directional signals for sterling. Resistance seen at Tuesday's hourly low of $1.2917 ahead of $1.2950. Support $1.2869/67 ahead of $1.2850. UK Labour Costs at 0930BST provide domestic data interest. Market awaits NY reaction to Trump's overnight tweets. Fed speakers are lined up, will watch for any reaction to the delay of fiscal stimulus.

MNI Techs: GBPUSD technical signals remain bearish and recent gains continue to be viewed as a correction. This was reinforced yesterday as Cable faced selling pressure once again. In Japanese candle terms, yesterday's price action is an engulfing reversal pattern and signals the end of the recent corrective bounce. Further weakness would open 1.2806, Sep 30 low and if this level is cleared, 1.2676, Sep 23 low. Resistance is at 1.3007, Sep 16 and Oct 6 high.