By Fast Brokers – The Cable wasn’t able to hold 1.50 and is trading back around 1.48 as negotiations in parliament heat up. Both Labour and the Tories are vying for an alliance with the Lib Dems, and Brown even offered to step down as PM should Clegg opt to side with his party. Should this happen, the ability of parliament to pass meaningful legislation to curb the nation’s fiscal deficit could be hampered. Either way, the uncertainty is weighing on the Cable as the risk trade has little to be optimistic about in general. China’s SCI officially entered a bear market this week amid fears that the government will need to be more aggressive in slowing down its overheating economy. Additionally, analysts and investors are questioning the effectiveness of the EU’s $1 trillion rescue package, punishing the risk trade in the process. On a positive note, UK manufacturing production surged as a weak Pound boost demand for manufactured goods. The positive reading is giving the Pound a bit of relative strength despite the weakness in the risk trade, highlighted by a sliding EUR/GBP. Investors will continue to keep their eyes on the news wires regarding any updates concerning the intense negotiations in parliament. Additionally, the UK will release CCC data, followed by a public address from King and the BoE inflation report. It will be interesting to see if UK employment continues to improve. If so, this could feed the Pound’s present relative strength. Furthermore, investors will be looking to see if inflation is continuing its uptrend, also a positive for the Cable since the BoE would be less inclined to loosen.
Technically speaking, the Cable obviously faces multiple downtrend lines considering the extent of last week’s pullback. The Cable also faces near-term technical barriers in the form of 1.50, intraday highs and 5/10 highs. As for the downside, the Cable has a couple uptrend lines in place along with the psychological 1.48 and 1.47 levels.
Present Price: 1.4816
Resistances: 1.4852, 1.4870, 1.4886, 1.4902, 1.4922, 1.4945, 1.4968
Supports: 1.4806, 1.4784, 1.4761, 1.4740, 1.4718, 1.4704
Psychological: 1.50, 1.49, 1.48, 1.47, May lows
(click chart to enlarge)
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