By Fast Brokers – The Cable appears to be bottoming out above July 8th lows as the currency pair avoids another retest of the psychological 1.60 level. However, as we anticipated, the optimism surrounding the BoE holding its level of QE steady was short-lived. Thursday’s rally in the GBP/USD stalled after the currency pair failed to receive noteworthy volume on the buy-side. As a result, the Cable has dipped back into risky territory with our 2nd and 3rd tier downtrend lines and July highs bearing overhead. Technical keys for the Cable to the downside will be staying above the psychological 1.60 level, July lows, and our 1st tier uptrend line. Regardless of the downward pressure in the Cable, the 1.58-1.61 area should continue to be a heavy-handed trading zone. Therefore, it would likely take a large pullback couple with abnormally high volume to break the Cable’s near-term support system.
The Pound is experiencing broad-based weakness after Britain’s Halifax HPI and manufacturing production data points disappointed analysts. Last week’s data continues a theme of economic setbacks in Britain after around six weeks of solid data releases from the U.K. Therefore, it seems the tables have turned, and the EUR/GBP is finally building some substantial momentum to the upside. However, despite the negative weight dragging down on the Cable, we wouldn’t be surprised to witness further stabilization.
News is a little light today, and investors are likely to take a deep breath before tomorrow’s large dose of economic data. Britain will begin with some important housing numbers late Monday, followed by the CPI and RPI early Tuesday. Investors are expecting the CPI to continue its contraction with a reading of 1.8%. Any number below 1.8% could spark the fear of deflation, resulting in a sizable pullback in the GBP/USD. In addition from the British data points, the U.S. will release retail sales, PPI, and business inventories on Tuesday. We also can’t forget that the 2nd quarter earnings season is just getting started. The earnings reports should be market moves if the numbers surprise in either direction. As a result, there should be a strong correlation between the Cable and U.S. equities for the near-term.
Present Price: 1.6130
Resistances: 1.6152, 1.6212, 1.6264, 1.6314, 1.6346
Supports: 1.6129, 1.6079, 1.6026, 1.5978, 1.5919
Psychological: 1.60
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