GBP/USD Tops 1.50

By Fast Brokers – The Cable surged back above 1.50 today as the Pound outperformed with the risk trade staging an impressive broad-based rally in reaction to the EU’s announcement of a $1 trillion bailout package.  Though the Cable’s rally from Thursday’s lows has been incredible, it will be important to see the Cable stick around 1.50 and post a follow through bounce over the coming sessions in order to solidify the bottom.  However, the currency pair is back above 3/26 lows and it would take a hefty shock to send the Cable back towards a test of last week’s lows over the near-term.  Meanwhile, the BoE kept its monetary policy unchanged and King refrained from straying from his previous talking points in an effort not to stir the unstable FX market.  Additionally, the Cable is reacting positively to signs that the Tories and Lib Dems may be willing to work together in order to enact austerity measures reigning in the UK’s troubling fiscal deficit.  However, UK politics are very fragile right now and it could prove unwise to count on action from any dialogue at this point in time.  The UK will release its manufacturing production data tomorrow and it would be encouraging to see a solid result since the improvement in manufacturing has been a driving force in the UK’s economic recovery.  In the mean time the focus will remain on the EU and the reaction from analysts and investors regarding their opinion of the bailout’s potential.  Before UK manufacturing production China will print a key data set, including CPI and industrial production.  Hence, it wouldn’t be surprising if the heightened activity carries over into Tuesday as investors decide where they want to take these markets.

Technically speaking, the Cable obviously faces multiple downtrend lines considering the extent of last week’s pullback.  The Cable also faces near-term technical barriers in the form of 1.50, intraday highs and 5/5 highs.  As for the downside, the Cable has a couple uptrend lines in places along with the psychological 1.49 area.

Present Price: 1.4975
Resistances: 1.5000, 1.5016, 1.5032, 1.5048, 1.5077, 1.5095, 1.5127
Supports: 1.4968, 1.4945, 1.4919, 1.4899, 1.4876, 1.4852
Psychological: 1.50, 1.51, 1.49, 1.48, May lows

(click chart to enlarge)

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