By Fast Brokers – The Cable has pulled back to our 1st tier uptrend line despite the continuation of strong economic data from the UK. CPI came in much hotter than anticipated yesterday, indicating the BoE could have a tough time keeping such a dovish monetary policy stance considering how much weight the central bank places on inflation. However, King tried to downplay the pop in CPI last night and this helped contain the Cable. In addition to yesterday’s strong CPI, today’s CCC number came in much lower than analyst expectations, indicating the UK’s employment picture continues to improve. The recent positive economic data from the UK has yielded an extensive relative strength in the Pound, highlighted by a collapse in the EUR/GBP. Such optimism concerning the Pound could continue until we see Friday’s Retail Sales number. However, the Euro’s rapid decline and concern regarding China’s tighter monetary policy stance has dragged down the risk trade, bringing the Cable along for the ride. That being said, the Cable has held up relatively well and is still trading above all of our previous trend lines. Meanwhile, attention will shift to the East with China’s GDP and Industrial Production data on deck. It will be very interesting to see how investors react to this data set. China’s recent hawkish monetary policy stance hints that the data will outperform. Although, should China’s economic data come in much stronger than analyst expectations then investors may actually be turned off by the risk trade in the anticipation of even more hawkish liquidity measures from the central bank. Investors will also digest UK CBI Industrial Order Expectations along with U.S. Unemployment Claims and the Philly Manufacturing Index. Hence, volatility could remain at a heightened state for the next 24 hours.
Technically speaking, as we mentioned the Cable has held up very well considering the plight of the EUR/USD. The Cable has held strong above our 4th tier uptrend line and still has multiple uptrend lines serving as technical cushions along with 1/15 and 1/13 lows. As for the topside, the Cable faces multiple downtrend lines along with 1/15 and 1/19 highs. Furthermore, the psychological 1.645 area could prove to be a technical barrier should it be tested.
Present Price: 1.6275
Supports: 1.6262, 1.6238, 1.6214, 1.6184, 1.6161, 1.6137
Resistances: 1.6303, 1.6318, 1.6340, 1.6360, 1.6379, 1.6407
Psychological: 1.60, 1.65, January highs and lows
Market Commentary provided by Fast Brokers.
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