By Fast Brokers – The Cable continues its brisk climb, forming a v-shaped recovery from last week’s pullback. The currency pair is making the most of yesterday’s manufacturing production report and the fact that we’re witnessing a broad depreciation of the Dollar. Britain’s data has continued to recover well as compared to the U.S. and EU, giving a relative strength to the Pound. However, there is still a force acting to the downside, and the Cable will need to overcome our 3rd tier downtrend line and previous June highs before we feel comfortable again with a bullish stance.
Some analysts predict we may see a sizeable pullback in U.S. equities soon due to the fact that the present run may be overextended. This would likely imply a deflection from our 3rd tier downtrend line and an ensuing pullback in the Cable due to their positive correlation. The currency pair did register noticeable volume to the downside last week, but this doesn’t necessarily imply a protracted downturn. In fact, we should note that the volume we saw on June 4th was the most action the currency pair has registered since mid-December of 2008. The market could be sending us a message, and volatility should ensue for the near-term.
An interesting conversation these days involves U.S. Treasuries and the response of equities. If Treasury yields continue to climb and this has a large, negative impact on equities, there’s the possibility of the GBP/USD and EUR/USD changing their positive correlation with the S&P as investors lose confidence in the Dollar. However, this is merely speculation and the positive correlation should be intact for the foreseeable future, just something to keep an eye on. The medium-term uptrend of the Cable is alive and well, and the currency pair should continue to exhibit relative strength since its economic data is out of the way for the week. If the GBP/USD can get above our top-end resistance near-term gains could accelerate.
Present Price: 1.6542
Resistances: 1.6574, 1.6626, 1.6686, 1.6723
Supports: 1.6497, 1.6458, 1.6412, 1.6371, 1.6315
Psychological: 1.65, 1.70
Market Commentary provided by Fast Brokers.
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