By Fast Brokers – The Cable is trading off intraday highs and seems to be considering a retest of Friday lows despite present stability in the Dollar and gold. FX markets are quiet today due to the lack of economic data and the wind down towards Christmas. However, the Pound is losing some of its relative strength today, highlighted by a pop in the EUR/GBP. Perhaps investors are finally reacting to the weak UK consumption data released at the end of last week. The UK will enter the newswires again tomorrow with the release of its Current Account and Final GDP data. Better than expected data could help the Pound retain its recent strength and keep the Cable above its psychological 1.60 level. On the other hand, weaker than expected UK numbers combined with strong U.S. econ data could extend the Cable’s downturn as investors favor the Greenback. The U.S. will release Final GDP data of its own along with Existing Home Sales. Should U.S. econ data continue to top analyst expectations, then the FX markets may exhibit further broad-based Dollar strength. Meanwhile, investors will likely have their attention focused on Wednesday BoE meeting. Although the central bank is expected to keep its recent monetary policy intact to see how recent QE measures play out, it will be interesting to see if there is a slight shift in the BoE’s monetary stance. Due to recent improvements in unemployment and prices, the BoE may deem it appropriate to exert a more hawkish tone in its monetary policy statement. Hence, volatility in the Cable could pick up a bit before Christmas as investors react to the BoE’s decision.
Technically speaking, the Cable’s large pullback this month has sent the currency pair below some key technical levels. Hence, it’s possible the Cable could be entering a more protracted downturn should the currency pair not stage a recovery above our 4th tier uptrend line, which runs through October lows. Meanwhile, we’ve installed multiple uptrend lines running through March lows. The fact we are now using March lows, or the 1.40 area, to create uptrend lines gives investors an idea of the extent of the damage inflicted by the Cable’s December pullback. Meanwhile, the Cable does have some near-term technical supports in the form of our 2nd and 3rd tier uptrend lines along with the psychological 1.60 level and 9/24 lows. As for the topside, the Cable faces multiple downtrend lines along with 12/18 and 12/16 highs. Additionally, the psychological 1.65 area should serve as a technical barrier should it be tested.
Present Price: 1.6105
Resistances: 1.6131, 1.6157, 1.6182, 1.6196, 1.6221, 1.6252
Supports: 1.6090, 1.6073, 1.6051, 1.6033, 1.5999, 1.5972
Psychological: 1.60, 1.65, September and October lows
Market Commentary provided by Fast Brokers.
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