By Fast Brokers – The Cable initially registered large losses today after Chancellor Osborne declared that there are many financial ‘skeletons in the cupboards’ left over by the previous administration. In other words, Osborne is implying that the government may need to make steeper budget cuts than anticipated. Parliament also announced that the emergency budget will be revealed on June 22nd and cut roughly 6 billion Pounds from the UK’s deficit. Regardless, the Cable has heeded Osborne’s ‘skeletons’ warning since investors will likely have to wait for over a month to discover what this actually means. Additionally, the Cable is benefitting from a relief rally in the risk trade as it seems a calm weekend has finally allowed investor anxieties to cool a bit following last week’s meltdown in the FX markets. However, investors shouldn’t get too apprehensive since glaring bet concerns remain and could reignite at a moment’s. Therefore, investors should keep a keen eye on the news wire this week for any stories or developments that could be a cause for concern for the risk trade. Meanwhile, the LIBOR rate is edging higher along with interest rates on EU short-term paper. Hence, markets are still in a fragile position. The UK will print CPI tomorrow and it will be interesting to see whether the figure remains above the key 3% mark. The BoE has cast aside excessive price growth over the past few months, meaning a 4th straight reading at 3%+ could put a little more pressure on the BoE to further address inflation concerns. However, considering the bleak tone of the BoE’s inflation report last week a pullback in CPI wouldn’t be surprising. Meanwhile, the key for the Cable is stabilization and the currency pair will look to climb back above its psychological 1.45 mark. On the other hand, if current supports don’t hold the Cable could be headed to 1.40
Technically speaking, the Cable faces mounting downtrend lines along with 5/14 highs and the psychological 1.45 level. As for the downside, the Cable has support in the form of intraday and 3/30 lows. Additionally, the psychological 1.40 level could serve as a solid support should it be tested.
Present Price: 1.4475
Resistances: 1.4493, 1.4507, 1.4531, 1.4563, 1.4588
Supports: 1.4439, 1.4416, 1.4398, 1.4366, 1.4340, 1.4305
Psychological: 1.44, 1.43, 1.45, May lows
(click chart to enlarge)
Market Commentary provided by Fast Brokers.
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