By Fast Brokers – The Cable is climbing back above our 2nd tier uptrend line despite disappointing CBI industrial new orders data. Today’s CBI data is a bit disconcerting because it counters the gradual improvement since March. In fact, today’s reading of -59 is worse than March’s -58. Present stabilization counters a pullback resulting from a bleak report from the IMF concerning the state of Britain’s budget balance amid spiraling injections of liquidity. Investors are also reacting positively to the BOE minutes released earlier showing the central bank currently has no intention of adding onto its $125 Billion QE program. Hence, the BOE could be thinking about the future by reigning in spending. On the other hand, the BOE also revealed it plans on increasing the reserve requirements of financials, denting future revenue. Taking all of this into account, the Cable is proving resilient to the downside, and investors are still encouraged about the concept of an economic recovery. Although the medium-term is filled with question marks, the immediate-term momentum remains in the bulls corner for now.
The GBP/USD is in the thick of June’s trading range, which we predicted could be a tough zone to break free of. The 1.65 psychological area proved to be a worthy adversary to the upside, though the uptrend lines are holding firm. The topside obstacles are clear: 1.65, July 20th highs, and our 3rd tier downtrend line. If the Cable can dart past these barriers a retest of July highs is likely. Britain will release retail and BBS mortgage approvals data tomorrow. We believe the mortgage approvals number could have a larger impact on the Cable than retail sales. Mortgage approvals are at an important technical juncture. Investors are expecting a slight increase from the last release, while a much higher/lower than expected number could result in a sizable appreciation/depreciation of the Pound. In addition to tomorrow data, the interaction of the S&P futures with 950 and yearly highs should have a strong influence on the path of the Dollar. Should the S&P breakout to the upside the GBP/USD would likely follow suit to its 3rd tier downtrend line.
As with the EUR/USD, the GBP/USD has an upward sloping near-term trend with hefty support to the downside. Therefore, near-term momentum is tilted towards the bulls’ corner for the time being. Looking at the downside, the Cable has our 2nd and 3rd tier uptrend lines and July 17th lows should sentiment turn sour. Hence, there are quite a few cushions on the bottom-end to weather a storm should it strike.
Present Price: 1.6402
Resistances: 1.6405, 1.6441, 1.6467, 1.6500, 1.6542
Supports: 1.6372, 1.6347, 1.6324, 1.6301, 1.6265
Psychological: 1.65
Market Commentary provided by Fast Brokers.
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