By Fast Brokers – The Cable is trying to hold previous May lows after the currency pair followed the risk trade lower after news broke that regional banks in Spain have debt issues. The government has taken control of a regional bank and the IMF issued a warning implying that conditions could deteriorate should Spain’s financial industry not undergo reform. Should conditions worsen in Spain and bond yields climb, then this could easily become a bigger problem than Greece considering the size of Spain’s economy. Fears surrounding Spain knocked the entire risk trade and the Cable was no exception. However, the Pound is outperforming, highlighted by a sharp downturn in the EUR/GBP. It seems the Cable is deriving a bit of its relative strength from Parliament’s intention to implement its 6 Billion Pound worth of budget cuts. Even though 6 billion is a flash in the pan, the concept that Parliament is serious about tackling its debt has given some confidence to the Pound. Regardless, the Cable should follow the risk trade and previous May lows could give way if today’s broad-based downturn accelerates. On a positive note, UK revised GDP printed in line with analyst estimates and no news is good news in this case. Investors are presently waiting on U.S. CB consumer confidence, though attention will likely remain focused on the EU and developments in Korea.
Technically speaking, the Cable faces multiple downtrend lines along with 5/24 highs. Additionally, the psychological 1.45 area could serve as a solid barrier should it be tested. As for the downside, the Cable has support in the form of intraday and 5/20 lows. Furthermore, the psychological 1.42 level could serve as a technical cushion if it’s reached.
Present Price: 1.4329
Resistances: 1.4362, 1.4387, 1.4409, 1.4443, 1.4468, 1.4498
Supports: 1.4326, 1.4301, 1.4265, 1.4232, 1.4173, 1.4126, 1.4100
Psychological: 1.42, 1.45, May 2010 and February 2009 lows
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