Careless Sterling

This week is not offering much from a macroeconomic viewpoint and the triggering of Article 50 is going to be the main market driver. It will be curious to observe the Cable, considering the current weakness of the US dollar after the failure of Trumpcare. 

During the past weeks the Brexit saga headlined the development of the Sterling, which was trading elevated and even had marked 8-week high against the greenback.The formal negotiations for triggering Article 50 are starting on Wednesday and generally it is supposed to fuel UK bulls. Meanwhile the news is beforehand exhausted, so we may not expect any significant changes for the day.

Technical readings on the daily chart are showing bullish indicators and the 20-day SMA has started to turn north. RSI is at around 62 level, marking higher highs and lower lows. Stochastic is placed within extreme overbought territory but is displaying lack of momentum. The increased buying interest might boost the pair towards the resistance area around 1.2650 – 1.2700 (the 23.6% Fibonacci retracement of post Brexit down leg). Looking to downside potential drop might be seen at 1.2400 level, where the 100-day SMA is acting as a dynamic support.