The Cable is attempting to stabilize right now after dropping below its psychological 1.50 level in the midst of a hefty selloff resulting from weak economic data and cautionary words from Moody’s and Fitch. Yesterday’s RICS number printed well below analyst expectations, confirming last week’s pullback in the Halifax HPI. Additionally, today’s UK Trade Balance figure underwent a discouraging setback to the -8 billion mark, signaling that demand for UK exports is not improving despite broad-based weakness in the Pound. Hence, investors are speculating that the BoE will remain comparatively dovish. However, we’d like to bring back to mind that last week’s UK Services PMI number experienced a sizable pop, an encouraging development considering the nation’s GDP is highly reliant on the services industry. As a result, negativity in the Pound could be a bit overdone. Today Fitch and Moody’s issued statements implying that the UK needs to get its fiscal house in order or face the risk of a downgrade in the nation’s credit rating. Disconcerting comments from the ratings agencies did place additional downward pressure on the Cable, though they aren’t telling us anything investors don’t already know. Keep in mind that the Cable’s selloff in the beginning of March resulted from a poll showing a dead heat in the parliamentary election, raising fear that there will be a deadlock when deciding upon whether to tighten fiscal spending. Hence, the UK’s worrying fiscal situation has been in the headlights for some time now. Although the data wire has been relatively quiet so far this week, it’ll begin to heat up tomorrow with China releasing New Loans and Trade Balance data over the next couple trading sessions. Strong data from China could help out the risk trade, whereas negative data could favor the Dollar. The UK will also release Manufacturing Production data tomorrow, though today’s Trade Balance figure sets the stage for a possible disappointment.
Technically speaking, the Cable has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday and 3/2 lows. As for the topside, the Cable faces multiple downtrend lines along with 3/3 and 3/8 highs. Meanwhile, the psychological 1.50 area could continue to play a role in the Cable’s near-term movements.
Present Price: 1.4952
Resistances: 1.4960, 1.4975, 1.4987, 1.5007, 1.5024, 1.5036
Supports: 1.4941, 1.4924, 1.4901, 1.4885, 1.4870, 1.4851
Psychological: 1.50, March lows
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