By Fast Brokers
The Cable pulled back on declining volume yesterday, although losses were negligible. The GBP/USD is already popping up Tuesday after British Construction PMI and Net Lending to Individuals both came in encouragingly above analyst expectations. The recovery in the British economy continues to outpace even optimistic expectations, giving the Pound relative strength. Though the EUR/USD is outperforming the GBP/USD on the present 4-hour bar, we believe the recent British economic data will help push the Pound higher over the remainder of the week.
Meanwhile, the S&P futures are breaking out to new yearly highs, adding fuel to the fire of the uptrend of both the Cable and the EUR/USD due to their positive correlation with U.S. equities. However, as with the EUR/USD, we notice an upcoming zone of technical resistance which may result in some near-term consolidation. For the Cable, the next obstacle becomes October 30 highs, making the psychological 1.65-1.66 zone a possible area of consolidation. The GBP/USD has made quite a run as of late, and it wouldn’t be surprising to see some bulls cash in profits.
We’re going to see some more important economic data surface from Britain over the next few days leading up to Thursday’s interest rate decision. With the EU pretty quiet until Thursday, we could see the GBP/USD exert higher comparative volatility for the time being. Investors will watch for continued confirmation of a recovery in British economic data along with good news from the U.S. economy. Despite our anticipation of approaching consolidation, we maintain our bullish outlook on the Cable trend wise due to the incredible progress made fundamentally over the past week. The GBP/USD has left behind our key 2nd tier downtrend, meaning there is quite a bit of room to work with to the upside.
Looking ahead to Wednesday, Britain will release their Halifax HPI and Services PMI data points along with key numbers from the U.S. If the data is better than expected all around, the GBP/USD may bypass consolidation and dart higher in optimism concerning a recovering global economy. If the Cable can climb above our 1.6679 resistance the currency pair could really take off. We maintain our bullish outlook on the GBP/USD due to the aforementioned analysis.
Fundamentally, we find resistances of 1.6462, 1.6522, 1.6587, 1.6679, and 1.6734. To the downside, we see supports of 1.6379, 1.6343 1.6307, 1.6233, and 1.6170. The 1.60 level acts as a psychological cushion with 1.65 serving as a psychological barrier. The GBP/USD is currently exchanging at 1.6440.
Market Commentary provided by Fast Brokers.
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