By Fast Brokers – The Cable has extended yesterday’s rally resulting from the Fed’s decision to maintain its loose monetary policy for the foreseeable future. Investors were speculating about the possibility of an alteration in the Fed’s timeframe for tightening liquidity. Hence, the central bank’s dovish language instigated a rally in the risk trade across the board. After cooling down during today’s Asia trading session, the Cable came to life again after the UK’s Claimant Count Change registered a -32.3k decline, considerably lower than estimates of an 8.2k increase. The shocking improvement in the UK’s unemployment picture countered bearish sentiment concerning weakness in manufacturing and fiscal fears, sending the Cable well beyond its 1.53 level in response. Additionally, MPC meeting minutes revealed some concern about inflation coupled with a unanimous vote to keep QE measures unchanged. The show of concern for inflation implies that the BoE could be reluctant to increase liquidity again, a Cable positive considering there has been considerable speculation that the BoE would loosen. The tide has certainly shifted for the Cable, which has surged well beyond our previous 3rd tier downtrend line. Our 3rd tier runs through February 17 highs, or the 1.58 level. Hence, technical indicators imply that the Cable could have more topside room to explore over the medium term. In the meantime, investors will key in on Bernanke’s testimony before congress during the afternoon. The UK will release Public Sector Net Borrowing tomorrow followed by U.S. CPI, weekly Unemployment Claims, and the Philly Index. Therefore, tomorrow could prove to be another active trading session. Meanwhile, investors should also keep in mind the potential for more negative psychological developments regarding the UK’s troubling fiscal situation.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with intraday lows. As for the topside, the Cable faces multiple downtrend lines along with intraday and 2/25 highs. Our new 3rd tier downtrend line could prove to be a key barometer since it runs through 1/28 highs, or the 1.6275 area.
Present Price: 1.5306
Resistances: 1.5318, 1.5334, 1.5354, 1.5377, 1.5397, 1.5416
Supports: 1.5288, 1.5272, 1.5252, 1.5236, 1.5281, 1.5205
Psychological: 1.53, 1.54, March highs
(click chart to enlarge)
Market Commentary provided by Fast Brokers.
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