Cable continued to consolidate last week in the after shock of Brexit, with the pair trading in a narrow range on the daily chart.
This continued at the start of this week as trading kept to a 70 pip range, and closed 9 pips lower off the open.
The ceiling of resistance for the pair is now firmly in place at 1.3480, with the floor of support at 1.3065 now being tested. Both of these levels are clearly defined with the accumulation and distribution indicator, with the red dotted line marking the ceiling, and the blue dotted line the floor.
Last Thursday’s weak attempt to rally on narrow spread price action and rising volume, was duly confirmed with Friday’s reversal and closing the week at 1.3109. Adding further downwards pressure are the high volume nodes on the volume point of control indicator between 1.3200 and 1.3300.
Given Friday’s weak services data (and despite better than expected manufacturing news), markets will be factoring in a interest rate cut in August which is likely to add further downwards pressure on the British pound in due course.
In the meantime, these levels now represent the extent of the technical channel now developing, and for any sustained trend to build, both are now key to the longer term direction for cable.