By Fast Brokers – The Cable is pulling back on rising volume along with the EUR/USD, raising a red flag as far as the uptrend is concerned. Hence, we could see a retracement back towards our 2nd tier uptrend line and the 1.60 level shortly. The GBP/USD was also batted away by our 2nd tier uptrend line intraday, a negative sign fundamentally. Weakness in the Pound comes despite a much better than expected Halifax HPI reading, not to mention the better than expected PMI reports throughout the week. Therefore, it wouldn’t be surprising if the Cable’s weakness was short-lived. As with the EUR/USD, the large volume to the downside is very disconcerting. However, we should continue to witness relative strength in the Pound as long as GBP data outperforms.
The Pound has been hit along with the other major Dollar pairs after Fed Chairman Bernanke made a heavy-handed speech regarding America’s intention to protect the Dollar and unwind its aggressive monetary policy as soon as possible. Bernanke’s rhetoric echoes that of Treasury Secretary Geithner during his visit to China. It appears the U.S. is trying to change the psychology of investors concerning the rapid depreciation of the Dollar. Their speeches have had a noticeable near-term impact, appreciating the Dollar across the board. However, whether the declaration is able to dislodge the medium-term uptrend of the Cable is another question. The current downward movement is certainly worth keeping an eye on, and investors should monitor the ability of our trend lines and psychological levels to hold. That being said, we have a negative outlook on the Cable in the near-term, yet maintain our medium-term bullish outlook trend-wise. If the Cable continues to pullback investors should watch for volume to dwindle before testing the waters.
Fundamentally, we find resistances of 1.6306, 1.6347, 1.6403, 1.6479 and 1.6581. To the downside, we see supports of 1.6233, 1.6159, 1.6077, 1.6006, and 1.5950. The 1.65 level acts as a psychological resistance with 1.60 serving as a psychological cushion. The GBP/USD is currently exchanging at 1.6212.
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