GBP/USD Consolidates Above 1.50

The Cable is holding strong above it highly psychological level following solid gains yesterday.  UK Services PMI came in much stronger than analyst expectations and registered the highest reading since February 2007.  The recovery in services is exactly what the doctor ordered since the UK is a service-oriented economy.  The Cable also derived strength from a positive reaction to Greece’s new austerity measures.  However, today’s UK HPI number registered a surprising decline, dipping 1.5%, the largest decline since May 2009.  Hence, yesterday’s optimism has been dampened by discouraging housing data.  Speaking of which, U.S. Pending Home Sales just printed much lower than analyst expectations, sending the Dollar higher as investors divest from the risk trade.  Meanwhile, the UK’s BoE meeting came to an uneventful conclusion.  The central bank opted to keep its policy unchanged despite some speculation that they might increase QE funding.  Although, the BoE did leave the door open for more liquidity should conditions warrant action.  It seems the central bank is content with playing it safe before elections considering the reaction we saw in the Pound on Monday after polls revealed a tight race.  The UK will release PPI data tomorrow and investors are expecting a flat reading.  It will be interesting how producer prices fair considering how hot CPI was last month.  Investors will also focus on the U.S. with the release of Non-Farm Employment Change and the headline Unemployment Rate.  However, a negative reading may not have too extreme of an impact since investors expect harsh winter weather may have curtailed hiring.  Regardless, U.S. employment data always has the potential to move FX markets, so investors should keep a close eye on tomorrow’s data wire.

Technically speaking, the Cable has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday and 3/3 lows.  Additionally, the psychological .150 level could work in the Cable’s favor shout it be retested.  As for the topside, the Cable faces multiple downtrend lines.  Our top tier downtrend line does run through 2/26 highs, meaning a breakout could yield substantial near-term gains should fundamental and psychological factors work in the Cable’s favor.

Present Price: 1.5078

Resistances: 1.5091, 1.5112, 1.5131, 1.5153, 1.5170, 1.5182

Supports: 1.5065, 1.5040, 1.5013, 1.4994, 1.4975

Psychological: 1.50, March lows

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