GBP/USD neutral/bearish near term – Scotiabank

In opinion of FX Strategists at Scotiabank, Cable faces strong support in the 1.2700/05 band in the near term.

Key Quotes

“The pound rallied yesterday on the release of the draft Withdrawal Agreement and the Cabinet agreement on the document but plunged overnight following news that five ministers – two Cabinet and three ministerial – had resigned in protest at the Brexit deal. PM May is delivering a stoic defence of her policy in parliament right now but the mood of the House is negative, suggesting that the deal would not pass a parliamentary vote. May could see further resignations after her comments and might face a leadership confidence vote tonight. Rather think another ministerial resignation would leave her in a very precarious position. Meanwhile, Oct Retail Sales fell 0.4% in month, well below expectations of a 0.2% gain (Sep’s 0.8% fall was revised to -0.3% M/M, however)”.

“GBPUSD retains a weak undertone. Gains yesterday stalled above 1.30 and around the 40-day MA, more or less as we expected. Intraday losses have been significant and modest rebounds look merely corrective. We see gains contained to the 1.2890/00 area from here intraday and feel that downside risks remain significant in the short run. We spot major support at 1.2700/05 and favour fading GBP gains still amid a strengthening technical downtrend”.