By Fast Brokers – The Cable has undergone a disconcerting selloff over the past 24 hours as the risk trade drops across the board. Investors seemed to have had a delayed reaction to the negative BoE inflation report with the central bank offering a sluggish outlook on inflation due to expected economic headwinds. Negativity from King and the BoE counters confidence stemming from a coalition in parliament and planned austerity measures. Although the coalition has received a warm welcome so far, their plans for splitting up large banks could be dragging on the Cable. However, there are a lot of psychological forces at work across Europe, so it’s difficult to pinpoint a specific cause for the Cable’s recent downturn. Speaking of Europe, the EUR/USD has dropped below its highly psychological 1.25 level as economists, central bankers, analysts, and investors question the effectiveness of the $1 trillion rescue package and the validity of the EU has a whole. Hence, speculation is spreading to nations with troublesome fiscal houses, making the Pound an easy target. In addition to these negative forces, investors are also disturbed by more SEC investors in the U.S. as regulatory agencies dig into cases from the economic crisis. On a positive note, most of the consumption data coming from the U.S. today satisfied expectations, continuing the theme of solid global fundamentals. However, solid U.S. data gives investors even more of an incentive to sell the Pound and Euro for the Dollar with the Greenback becoming a desirable safe haven amidst global economic uncertainty.
Technically speaking, the Cable faces mounting downtrend lines along with intraday and 5/13 highs along with the psychological 1.46 and 1.47 levels. As for the downside, the Cable has support in the form of an uptrend running through intraday lows along with the psychological 1.45 level.
Present Price: 1.4574
Resistances: 1.4590, 1.4616, 1.4630, 1.4654, 1.4679, 1.4701
Supports: 1.4574, 1.4563, 1.4531, 1.4507, 1.4495
Psychological: 1.47, 1.46, 1.45, May lows
(click chart to enlarge)
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