By Fast Brokers – The Cable has undergone a massive selloff today as the Pound underperforms in reaction to the parliamentary election results. As expected, the concept of a hung parliament does not bode well for the Pound as discussion sparks whether a divided government will be able to enact austerity measures necessary to clean up the UK’s fiscal mess. The election results prove untimely considering the risk trade collapse that has taken place over the past couple trading sessions. Investors rushed towards the dollar yesterday as U.S. equities underwent an incredible selloff in reaction to mounting fiscal problems in the EU and a ‘technical error’ on the stock exchange floor. Contagion in the EU is leading analysts to wonder whether the UK is next and this places more emphasis on the fact that the UK now has a minority government. However, with the election out of the way, investors will now look to the G7 conference call taking place today to see whether the developed nations can issue a comforting, unified message in reaction to yesterday’s market panic. That being said, it will be interesting to see whether the risk trade can manage to pull itself together and stabilize over the remainder of the session. The weekend can give the markets time to cool off and look forward. That being said, China’s key economic data releases on Monday and Tuesday could be a deciding factor regarding whether the risk trade can form a new base or whether the brisk risk route continues. The BoE will also make a monetary policy decision on Monday, meaning the Cable could be in for another active session to kick off the week. Investors will be looking to King & Co. to issue a statement that can reinvigorate confidence in the global economic recovery. After all, outside of the fiscal issues in the EU fundamentals have been altogether sound.
Technically speaking, the Cable faces mounting layers of downtrend lines along with intraday highs and the psychological 1.47 and 1.48 areas. As for the downside, the Cable has technical supports in the form of April 2009 lows and the psychological 1.45 area.
Present Price: 1.4693
Resistances: 1.4707, 1.4730, 1.4748, 1.4762, 1.4775, 1.4795
Supports: 1.4654, 1.4641, 1.4616, 1.4594, 1.4574, 1.4559
Psychological: 1.45, 1.46, 1.47, 1.47, April 2009 lows
(click chart to enlarge)
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