By Fast Brokers
The Cable weakened with U.S. equities yesterday, exercising its positive correlation with the S&P futures as investors locked in gains at the highly psychological 1.60 level. Today’s CBI realized sales number was a little disappointing, as was yesterday’s BBA mortgage approvals. Therefore, the optimism surrounding a recovery in consumption and housing has been dented. Regardless, all-around economic data from Britain remains on the upswing until we see significant drawbacks across the board. Hence, the Cable remains in a bullish trend, although it may experience relative weakness as compared to its European counterpart, reflected by a stabilizing EUR/GBP.
Our 2nd tier downtrend line is a critical obstacle since it stretches back to July 2008 highs, forming our last foreseeable blockade for the medium-term. Hence, even though the Cable’s near-term gains have been impressive, we could witness even more exciting movements to the upside if the currency pair can clear the 2nd tier. Due to the significance of present levels, we wouldn’t be surprised to experience continued hesitation around 1.60 as investors debate leaving the key resistance behind. Meanwhile, the GBP/USD is building up a solid base between 1.5822 and 1.5988, which could serve as a reliable defense should the currency leap above 1.60. We advise keeping a close eye on volume over the next couple sessions. A large up-bar backed by considerable volume could indicate a forthcoming breakout.
All eyes will be on U.S. equity markets and their reaction to incoming economic data and Treasury bill auctions. As with the EUR/USD, the inconsistent performance of the S&P serves as a negative counterpunch to the optimistic fundamentals exhibited by the Cable. However, if the S&P can manage to shake loose of 900 and make a fundamental move to the upside this would likely push both the GBP/USD and the EUR/USD beyond their respective barriers. We maintain our bullish outlook on the GBP/USD trend-wise until further notice.
Fundamentally, we find resistances of 1.5988, 1.6062, 1.6129, 1.6233, and 1.6307. To the downside, we see supports of 1.5988, 1.5899, 1.5822, 1.5727, and 1.5662. The GBP/USD is currently exchanging at 1.5953.
Market Commentary provided by Fast Brokers.
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