By Fast Brokers – The Cable rallied earlier today, popping back above 1.50 in reaction to news that Clegg will become deputy prime minister, signaling the Tories and Liberals are willing to cooperate with each other. Additionally, Cameron hit the ground running on his first day and revealed that the UK government will release an emergency budget over the next 50 days which should shave roughly $9 billion off of the nation’s budget deficit. In other good news, the CCC printed lower than expected and average earnings skyrocketed, implying both employment and spending power are improving. This data tacks onto this week’s impressive manufacturing production figure. Hence, the fundamental outlook for the UK is improving despite troubles in the EU. While this is all positive news for the Cable, the BoE’s inflation report crashed the party as the central bank stated that it expects inflation to remain under 2% over the next two years due to economic headwinds. Therefore, the BoE’s outlook hasn’t improved as quickly as investors may have hoped, implying that the central bank could be reluctant in tightening liquidity. The UK will keep the data flowing tomorrow by releasing its trade balance. Considering the strong manufacturing data we’ve seen it wouldn’t be surprising if exports improved as the Pound weakens.
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 5/10 highs. As for the downside, the Cable has a couple uptrend lines in place along with the psychological 1.48 and 1.47 levels.
Present Price: 1.4863
Resistances: 1.4870, 1.4886, 1.4902, 1.4922, 1.4945, 1.4968
Supports: 1.4852, 1.4831, 1.4806, 1.4784, 1.4761, 1.4740, 1.4718
Psychological: 1.50, 1.49, 1.48, 1.47, May lows
(click chart to enlarge)
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