Cable remains on the firm footing during the first half of the week, advancing further north of the 1.2200 handle against the backdrop of the renewed offered tone around the greenback.
Yields from UK money markets remain supportive of a stronger Sterling, as they clinched fresh highs in pre-Brexit levels seen in late June. In fact, yields in the 10-year benchmark have reclaimed levels above 1.22% on Monday, although they’re giving away some ground so far today.
In the meantime, dwindling fears on a ‘hard Brexit’ scenario have given some respite to GBP, in turn collaborating with the upside.
However, GBP extreme positioning – speculative net shorts remain at record levels – and Brexit headlines remain poised to drive the price action in the next months, all along with USD-dynamics via a potential move by the Fed towards year-end.
Gains in GBP/USD remain capped by the 1.2750/60 area, where are located the near-term resistance line off September’s top near 1.3450 and pre-‘flash crash’ highs. On the other hand, decent support is found around last week’s lows in the 1.2080 area. If cleared, a new visit to post-‘flash crash’ lows will then be on the cards.