By Fast Brokers – The Cable is having trouble breaking through 1.48 after an impressive run so far this month. The Cable is moving sideways despite another encouraging decline in the claimant count change. Hence, either the Cable is dealing with overbought conditions or the currency pair is dealing with headwinds blowing from the EU. Although, UK CPI did drop a basis point yesterday. Even though CPI remains above the key 3% mark, a cooling in prices takes some of the pressure off of the BoE to tighten liquidity. Rumors are spreading that the IMF and U.S. Treasury have been working together on a $350 billion line of liquidity for Spain. The Spanish government has adamantly denied the rumors, though this is the second time this month we have heard rumblings that Spain may be next in line for aid. Spanish and Portuguese bond yields are widening in wake of the rumor and are likely weighing on a Cable which would normally be rising on such positive UK employment data. Meanwhile, the EUR/USD is continuing its consistent climb from June lows, a positive development for the risk trade as a whole since a tumbling Euro has been weighing on most dollar pairs the past couple months. The UK will light up the data wire again tomorrow with retail sales followed by U.S. CPI, unemployment claims, and the Philly Index. Hence, markets could remain volatile as investors digest the wealth of data and earnings. Additionally, investors should focus on the EU news wires again to see if there are any concrete developments in Spain.
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: 1.4796
Resistances: 1.4810, 1.4854, 1.4890, 1.4912, 1.4953, 1.4988
Supports: 1.4750, 1.4720, 1.4680, 1.4628, 1.4585, 1.4544
Psychological: 1.50, 1.45, June highs and lows
(click chart to enlarge)
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