GBP/USD Tests Tuesday Lows Amid Pound’s Relative Weakness

By Fast Brokers – The Cable is still trading well below its psychological 1.55 level as the Pound experiences a relative weakness, highlighted by today’s pop in the EUR/GBP.  Although the UK was quiet on the data front today, a BoE policy maker, Adam Posen, reiterated King’s statement that the central bank is prepared to expand liquidity should the UK economy deteriorate further.  On the other hand, Posen also stated that the BoE may need to find a way to tighten should the economic recovery pick up steam.  In essence, Posen affirmed the BoE’s new flexible monetary policy stance.  The possibility of looser liquidity could be what is weakening the Pound today.  Meanwhile, investors are waiting for U.S. New Home Sales data along with Bernanke’s Congressional testimony.  Strong housing data would weigh on the Cable with investors favoring the U.S. economy.  On the other hand, weak housing data could buoy the Cable and the risk trade.  Furthermore, investors will be eyeing Bernanke’s testimony for any hints in regards to the Fed’s future plans and specifically the Fed Chief’s reaction to inquiries concerning the recent 25 basis point hike in the discount rate.  Should Bernanke happen to imply additionally tightening measures down the road, this could apply downward pressure on the Cable since tighter liquidity in the U.S. is a Dollar positive.  Meanwhile, it will be interesting to see if the Cable can hold above 2/23 and previous February lows.  King will address the general public tomorrow and the UK will release CBI Realized Sales data.  It wouldn’t be surprising to see King maintain the BoE’s flexible monetary policy stance for the time being.  All eyes will likely remain on the U.S. tomorrow as Bernanke continues his testimony along with the release of U.S. Durable Goods Orders and weekly Unemployment Claims.

Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/23 highs.  Additionally, the 1.55 level could serve as a technical barrier should it be tested.  As for the downside, the Cable has multiple uptrend lines serving as technical cushions (off screen) along with 2/23 and 2/18 lows.

Present Price: 1.5410

Resistances: 1.5415, 1.5436, 1.5458, 1.5482, 1.5503, 1.5524, 1.5543

Supports: 1.5390, 1.5365, 1.5348, 1.5317, 1.5290, 1.5263, 1.5226

Psychological: February lows, 1.55, 1.53

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