By Fast Brokers – The Cable continued to propel from our 1st tier downtrend line, gaining traction to the upside after Britain released data showing surveyors saw housing prices recovering at an encouraging rate. Additionally, although Britain’s CPI was a discouraging 1.8%, the number met analyst expectations and the Pound is being rewarded accordingly. Despite the Cable’s recent stability, the rally is fading in the face of insufficient buy-side volume, turning course after failing to surpass July 9th highs and our 3rd tier downtrend line. Could it be that another tight trading range is forming, similar to the one experienced in June? Such a progression would fall in line with the concept of summer doldrums. Correlation wise, the S&P and crude futures have recovered to comfortable levels, avoiding another large selloff for the time being. Therefore, the S&P and crude could be in for more consolidation as well with investors torn between mixed economic data and earnings reports, supporting a new trading zone for the GBP/USD.
British economic data is not done for the week, with the new claimant count change (CCC) and average earnings index on deck tomorrow morning. Analysts are expecting a slight increase in the CCC from 39.3k to 41.4k. However, we anticipate the CCC will continue its brisk decline and comfortably beat expectations. A lower than anticipated CCC number would likely result additional stability to the GBP/USD and provide relative near-term strength to the Pound across the board. The key near-term obstacles for the Cable continue to be July 9th highs and our 3rd tier downtrend line. Meanwhile, the currency pair has stacked additional cushions to the downside via its recent performance, most notably our 1st tier uptrend line, 2nd tier downtrend line, July 13th lows and the psychological 1.60 level. Therefore, it would take a large movement on abnormally high volume to send the Cable spinning back into its downtrend. Altogether, the GBP/USD is still searching for its near/medium-term directional identity, and it doesn’t seem the confusion will be solved today.
Present Price: 1.6276
Resistances: 1.6314, 1.6346, 1.6380, 1.6433, 1.6470
Supports: 1.6255, 1.6211, 1.6168, 1.6127, 1.6077
Psychological: 1.60, 1.65
Market Commentary provided by Fast Brokers.
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