By Fast Brokers
The Cable’s key 1.50 survived a 2nd retest on Friday and passed with flying colors. 1.50 withstood a high volume sell-off and bounced off our 3rd tier downtrend lines, sending a strong message that the bulls are in the driver’s seat. The Cable is coming off Friday’s highs after France and Italy released weaker than expected Industrial Production data. Additionally, U.S. equities are under a bit of selling pressure as investors take profits. Despite today’s weakness on light volume, the GBP/USD is distancing itself from our 2nd tier downtrend line while keeping above 1.50. We previously set these as our benchmark barriers to the upside. Therefore, we believe the fundamentals are still in place for more substantial games in the near to medium term.
The EUR/USD made a similar fundamental achievement on Friday by jumping past its 3rd tier downtrend line. Therefore, since the two are ultimately positively correlated, the argument for an uptrend in the Cable is more convincing. Naturally, the fate of the Cable relies heavily on the performance of U.S. equities. Hence, investors should keep a watch on the S&P futures to make sure they hold 900. We maintain our bullish outlook on the GBP/USD for the aforementioned reasons. Our 3rd tier uptrend line should continue to act as a line of defense in the face of any near-term weakness. However, if our 3rd tier and 1.50 don’t hold, then the validity of the uptrend could be thrown into question.
Britain will release its BRC Retail Sales Monitor and RICS House Price Balance late in Monday’s session followed by Manufacturing Production and Trade Balance on Tuesday. Therefore, we could see some reasonable volatility over the next 24 hours.
Fundamentally, we find resistances of 1.5114, 1.5158, 1.5213, 1.5256, and 1.5256. To the downside, we see supports of 1.5059, 1.5017, 1.4988, 1.4946, and 1.4902. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5109.
Market Commentary provided by Fast Brokers.
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