By Fast Brokers – The Cable is consolidating above Monday’s lows after undergoing a hefty selloff in response to more warning shots concerning UK debt levels. Moody’s issued fresh statements warning the UK, U.S. and several EU countries to get their fiscal houses in order. The prospect of a hung parliament in the UK is worrying investors that the government will not be able to make the necessary budget cuts to counter rising debt levels. The EU issued a similar warning to the UK today citing concerns that proposed austerity measures are not enough to alleviate fiscal fears. Another storm of negative statements dealt a blow to the Pound, highlighted by resilience in the EUR/GBP. Hence, it’s the same old story for the Pound with psychological attacks weighing down the GBP/USD. The UK will be quiet again on the data wire, leaving investors focused on today’s FOMC meeting. Should the Fed maintain its dovish monetary language, this could help buoy the Cable and the risk trade in general. However, if the Fed tightens its stance this could place downward pressure on the Cable with investors heading to the Dollar. Therefore, investors should keep an eye on the market’s reaction to today’s Fed statement. On a positive note, gold is rebounding from $1100/oz. Gold is normally negatively correlated with the Dollar on a trend basis, so gold’s bounce could imply further stability in the risk trade. Meanwhile, it will be interesting to see if the Cable can pop back above our 1st tier downtrend line since it runs through 2/23 eyes and has been a bearing concerning the longevity of the Cable’s present upswing from 2010 lows.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with 3/15 and 3/11 lows. The psychological 1.50 area comes into play again and could serve as a solid cushion. As for the topside, the Cable faces multiple downtrend lines along with 3/3, 3/8 and 3/12 highs.
Present Price: 1.5056
Resistances: 1.5065, 1.5071, 1.5085, 1.5098, 1.5106, 1.5118
Supports: 1.5037, 1.5029, 1.5020, 1.5012, 1.5004, 1.4998
Psychological: 1.50 and March highs and lows
(click chart to enlarge)
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