By Fast Brokers
The Cable reacted positively despite worse than expected Prelim GDP data from the U.S. yesterday, catapulting towards our previous top-tier resistance of 1.4951 before reversing course. The GBP/USD’s reversal marks a failure to climb through 4/6 highs, let alone tackle 1.50 and April highs. Therefore, the Cable certainly has its work cut out for it in to the upside as the S&P futures approach their highly psychological 900 level. Our 1.4730 support should prove to be a critical battle ground in the near-term if the Cable is to sell off further. If this level doesn’t hold, we could see a reversal towards 1.4626.
Weakness in the Cable comes despite a better than expected Nationwide HPI number. Even though the data surprised to the upside, housing prices registered a decline from April 2nd’s release. We saw a similar improvement in the HPI in November 2008 only to witness a sharp reversal in December. Therefore, investors could be concerned we’re witnessing another head-fake in home prices. Don’t forget the financial crisis began with a collapse in housing, meaning stabilization in this area is a crucial leg in the chair of recovery.
Skepticism aside, equities have been performing extraordinarily well as of late while breaking free of key fundamental barriers. Therefore, if bright spots in economic data and outperformance in equities spells an economic recovery, the Pound should appreciate against the Dollar trend-wise due to its positive correlation. That being said, we have the results of the stress tests coming on Monday, implying volatility should remain elevated through the remainder of the week.
We maintain our bullish stance on the Cable, and the currency pair could recover quickly should it pop back above our 2nd tier downtrend line.
Fundamentally, we maintain resistances of 1.4773, 1.4826, 1.4870, 1.4905, and 1.4951. To the downside, we hold our supports of 1.4730, 1.4667, 1.4626, 1.45667, and 1.4532. 1.45 serves as a psychological cushion with 1.50 acting as a key psychological barrier. The GBP/USD is currently exchanging at 1.4749.
Market Commentary provided by Fast Brokers.
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