By Fast Brokers – The Cable is trading off of intraday highs after setting new January highs. The Cable continues to hold strong technically after the Pound outperformed last week amid positive UK data flows. However, the Cable has remained within the confines of our trend lines as we notice range-bound behavior in the EUR/USD and gold as well. This behavior tells us that investors are still having a directional debate due to the negatively mixed U.S. economic data so far this month. However, activity should heat up as the weak progresses. The earnings season will kick into first gear and we’ve got a slew of economic data on deck. The UK will release CPI data along with the BoE’s Inflation Letter. The BoE seems intent on using inflation as a barometer guiding its monetary policy. Therefore, a larger than expected increase in prices could boost the Cable as investors speculate a more hawkish monetary stance from the BoE. On the other hand, sluggish pricing data could take some of the wind out of the Pound’s sails and test the resilience of our uptrend lines. Additionally, the U.S. will release PPI and Building Permits data on Wednesday followed by China’s GDP and Industrial Production numbers during Thursday’s Asia trading session. Hence, volatility could really pick up as the week wears on.
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 and 1/15 lows with multiple uptrend lines serving as technical cushions. As for the topside, the Cable faces multiple downtrend lines along with intraday and 12/16 highs. Our 4th tier downtrend line runs through December ’09 highs. Therefore, an eclipse of our 4th tier could yield a more sizable leg up.
Present Price: 1.6310
Supports: 1.6281, 1.6262, 1.6238, 1.6214, 1.6184, 1.6161
Resistances: 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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