Originally published by AxiTrader
The pound is back in the low 1.22 region against the US dollar while at the same time EUR/GBP is back up at 0.8645.
It's just the latest sign that traders and investors remain cautious of the impact of the triggering of Article 50 will have on the economy.
Indeed even though the UK economy has outperformed expectations by a wide margin since the Brexit vote most pundits see that as a temporary situation which will be reversed through times.
But over the weekend Britain's Chancellor of the Exchequer Philip Hammond said he needs to "keep reserves in the tank" when he hands down his budget this week. He's signalling that he won't spend the dividend that this better than expected economic performance has delivered the UK government.
"If your bank increases your credit card limit, I don't think you feel obliged to go out and spend every last penny of it immediately," Hammond told the BBC.
he added "as we embark on the journey that we will be taking over the next couple of years, we are confident we have got enough gas in the tank to see us through that journey".
Clearly Hammond isn't convinced UK growth will stick at the current rate. And if the government - with all its insights into the actual workings and tax receipts of the economy is still worried about Brexit then it is only a short walk to the market's fears.
Which brings me to the recent price action in GBP/USD and EUR/GBP.
Looking first at the pound against the US dollar and the price action suggests that the target in the 1.20/21 region I articulated in last week's piece"Sterling is slipping again" is still in train.
The weekly chart below builds on the daily I highlighted in this morning's Market's Wrap. What's clear is that the old resistance line is in the frame at 1.2130 but 1.22 needs to break first. That would take prices below Friday's low and bounce in GBP/USD.
Looking at EUR/GBP and it's clear it is at a very interesting juncture after the rally of the past week or so.
last night saw EUR/GBP tentatively climb out of the downtrend - wedge - it has been in since last July. That's potentially very bullish - pound bearish - but I'm not convinced yet that the break will stick. For that to happen I would like to see EUR/GBP close above 0.8680 which is the 61.8% retracement level of the January/February 2017 selloff.
It would also break above last night's high and thus reinforce the break.
Here's the chart.
Have a great day's trading.