By Fast Brokers – The Cable is finally giving into intraday risk-aversion following weaker than expected Prelim UoM Consumer Sentiment and Industrial Production data. The AUD/USD and S&P futures also pulled back in reaction to the release, signaling investors are becoming a bit cautious in regards to the health of the global economy. The risk trade was hit by a few developments earlier today, most notably more cautionary words from the EU in regards to the health of Greece’s economy. The EUR/USD proceeded to sell-off aggressively while the Cable held its ground highlighted by a huge leg down in the EUR/GBP. Furthermore, the AUD/USD weakened as investors reacted to signs that China is tightening liquidity in fear that this will decrease demand for Australia’s commodities. The reality that China is trying to cool down its economy could have a negative global impact since China has been the engine to the economic recovery. Hence, today’s risk-aversion has both fundamental and psychological backing, enticing the Cable to follow suit despite recent resilience. The UK will light up the wires again next Tuesday with the release of CPI. The BoE monitors prices closely while making decisions regarding monetary policy. Hence, sluggish CPI could deliver a blow to the Pound’s recent relative strength. On the other hand, a positive CPI number could help the Cable stabilize and maintain its solid uptrend.
Technically speaking, we recognize the Cable’s trend lines are approaching inflection points, a signal that heightened volatility could be approaching. Meanwhile, the Cable is still trading above 1/04 highs with multiple uptrend lines serving as technical cushions. As for the topside, the Cable faces multiple downtrend lines along with 1/15 and 12/16 highs. Therefore, the Cable has solid technical levels on either side.
Present Price: 1.6265
Resistances: 1.6262, 1.6238, 1.6214, 1.6184, 1.6161, 1.6133
Supports: 1.6318, 1.6340, 1.6360, 1.6379, 1.6407, 1.6431
Psychological: 1.60, 1.65, January highs and lows
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