By Fast Brokers – The Cable is holding strong around our 1st tier uptrend line after both CPI and RPI data points printed one basis point hotter than analyst expectations. Hence, the recovery in UK inflation appears on track. This should be reassuring to the BoE since prices are nearing its comfort level of 2% growth. U.S. PPI data printed 10 basis points hotter than anticipated, a positive development for the concept of a tighter monetary policy from the Fed. However, U.S. manufacturing and production data printed mixed, taking a bit of wind out of the Dollar’s sails. Mixed fundamental data from the U.S. is helping stabilize both the Cable and EUR/USD as gold stages a little rally. Meanwhile, the EUR/GBP has taken another step down, indicating a relative strength in the Pound likely stemming from encouraging UK CPI and RPI results. The UK will release some more data points tomorrow, most notably a new CCC figure. Should the UK’s CCC come in stronger than expected like the last release this could help add onto the Pound’s present relative strength. However, a discouraging CCC number could damage the argument from a tighter monetary policy from the BoE, yielding weakness in the Cable.
In addition to more key data from the UK and EU, the U.S. will release Building Permits along with its CPI data followed by the Fed’s announcement of its monetary policy decision. Although the Fed is likely to keep its monetary policy unchanged, investors will be paying close attention to the Fed’s wording to monitor whether the central bank takes a more hawkish stance in light of positive developments in U.S. unemployment and consumption data. That being said, any unexpected action from the Fed would likely yield noticeable volatility due to the psychological influence of central banks on the FX markets. Regardless, activity could pick up in the next 24-48 considering the wealth of data and news investors will be digesting.
Technically speaking, the Cable still still flirting with dangerous territory since our 2nd tier uptrend line runs through October lows. Hence, should our 2nd tier uptrend line give way, we could witness another sizable leg down towards the 1.58-1.60 area. Below our 2nd tier uptrend line the Cable does have our 1st tier uptrend line (off chart) serving as a technical cushion along with the psychological 1.60 level, September lows and October lows. As for the topside, the Cable still faces multiple downtrend lines along with 12/9 and 12/7 highs. Furthermore, the psychological 1.65 level could serve as a technical barrier should it be tested.
Present Price: 1.6218
Resistances: 1.6252, 1.6265, 1.6286, 1.6325, 1.6346, 1.6371
Supports: 1.6205, 1.6186, 1.6163, 1.6133, 1.6113, 1.6098
Psychological: 1.60, 1.65, September and October lows
Market Commentary provided by Fast Brokers.
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