By Fast Brokers – The Cable has bounced back above its psychological 1.50 level after Consumer Inflation expectations came in at 2.5%, a basis point above analyst expectations. The price gains we’ve seen in the UK over the past month could keep the BoE at bay, even if the central bank has stated that the price pop is just a result of a return of the VAT. Regardless, investors are sending the Cable higher in speculation that the BoE would likely hold off any increases in QE until it is sure rising prices are a temporary affair. Keep in mind that the BoE places extra emphasis on inflation, so pricing data usually has the potential to move the Pound. The U.S. Trade Balance revealed a smaller deficit than anticipated while Unemployment Claims logged a 6k decline. The initial reaction was negative for the risk trade, though the Dollar is pulling back again as we speak. In the precious metals sector investors should keep an eye on gold. Gold has tumbled back to its psychological $1100/oz level. Though the Dollar’s correlation with gold hasn’t been reliable lately, it will be interesting to see whether this pullback forebodes a Greenback movement across the board. Attention will remain focused on the U.S. tomorrow with the release of key Retail Sales and UoM Consumer Sentiment data. Strong U.S. consumption figures could breathe some life into the risk trade. On the other hand, since the EU and UK have been mired in uncertainty lately, strong U.S. data could have the opposite effect and send investors scurrying towards the Dollar. Therefore, it will be interesting to see how the Dollar reacts tomorrow since correlations have been a bit unreliable as of late.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with intraday and 3/10 lows. As for the topside, the Cable faces multiple downtrend lines along with intraday and 3/4 highs. Our 2nd tier downtrend line could serve as a key barrier since it runs through previous March highs, or the psychological 1.52 area. Meanwhile, the psychological 1.50 area could become a technical cushion should the Cable continue to solidify above.
Present Price: 1.5023
Resistances: 1.5024, 1.5036, 1.5054, 1.5066, 1.5076, 1.5085
Supports: 1.5003, 1.4989, 1.4980, 1.4971, 1.4959
Psychological: 1.50, March highs and lows
(click chart to enlarge)
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