By Fast Brokers – The Cable surged back towards 1.48 after the Office of Budget Responsibility estimated a smaller UK budget deficit than anticipated. The downward revision gives investors more confidence that the UK will be able to maintain its AAA rating, clearly a Cable positive. However, the 2011-2012 deficit projection is still above 10% and as we’ve seen in the past, budget estimates are not always accurate. Regardless, the OBR’s announcement has allowed the Cable to expand upon its upward momentum originating from May lows. These figures from the OBR come a week before parliament releases its highly anticipated emergency budget and it will be interesting to see what the treasury comes up with. Meanwhile, investors will shift their focus UK CPI and the inflation report hearings. Even though the BoE has waved off inflation concerns, CPI has been over its target of 3% for some time now and investors will be looking carefully to see if recent inflationary pressures really do cool. Investors will also be focusing on the EU again as analysts monitor bond spreads of PIIGS countries following Moody’s downgrade of Greek debt to junk status. Although the move does not come as a surprise, the downgrade could cap gains in the Cable and other major dollar pairs over the near-term.
Technically speaking, the Cable faces downtrend lines running through April highs along with 6/14 highs and the psychological 1.48 level. As for the downside, the Cable is developing a new near-term support structure, including downtrend lines running through May and June lows. The Cable also has technical supports in the form of 6/14 and 6/11 lows along with the 1.47 and 1.46 level should they be tested.
Present Price: 1.4755
Resistances: 1.4769, 1.4810, 1.4854, 1.4890, 1.4912, 1.4953
Supports: 1.4720, 1.4690, 1.4648, 1.4609, 1.4583, 1.4552, 1.4526
Psychological: 1.50, 1.45, June highs and lows
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