By Fast Brokers – The Cable is drifting lower towards its psychological 1.65 level after BBA Mortgage Approvals and Prelim Business Investment came in mixed. While business investment registered a modest improvement, mortgage approvals printed a bit weak. The moderation in mortgage approvals supports last week’s statements from Nationwide and Bloomberg concerning a slower than expected recovery in Britain’s housing market. However, it seems BoE Governor King’s comments are having the larger impact on the Cable after King stated that Britain’s economy still faces ‘profound challenges’. King’s statement also revealed that the BoE’s tightening of liquidity stretch out over a 2-3 year period. Additionally, King still can’t rule out the use of further QE injections should the economic recovery take a negative turn. King’s most recent statements are having a negative psychological impact on the Pound, highlighted by an upturn in the EUR/GBP. Britain will release its Revised GDP data tomorrow, meaning volatility could pick up in the Cable should the GDP number surprise in either direction. On the other hand, activity in the FX markets should wind down as investors clock out early for the Thanksgiving holiday.
Meanwhile, investors should keep an eye on the S&P’s ongoing battle with 1100. Since the Dollar is negatively correlated with U.S. equities, the Cable’s near-term fate may depend on S&P’s decision on whether to duck back into a downtrend or finally leave 1100 behind. The U.S. will release some key econ data of its own tomorrow, including Durable Goods Orders, New Home Sales, and weekly Unemployment Claims. However, as we stated before, the holiday shortened weekend may cause any notable activity to carry over into next week.
Technically speaking, the Cable continues to find support along the psychological 1.65 level and our 2nd tier uptrend line. Our 2nd tier uptrend line runs through previous November lows, meaning a retracement could result in a movement towards 1.63. As for the topside, the GBP/USD faces multiple downtrend lines along with 11/23 and 10/23 highs. Recent weakness in the Cable has created quite a few immediate-term topside obstacles, meaning the currency pair would likely need a sizable boost in buy-side activity to get above our top-end barriers.
Present Price: 1.6534
Resistances: 1.6577, 1.6619, 1.6638, 1.6664, 1.6694, 1.6730, 1.6761
Supports: 1.6527, 1.6489, 1.6457, 1.6427, 1.6398, 1.6341, 1.6301
Psychological: 1.65, November Highs and Lows, 1.70
Market Commentary provided by Fast Brokers.
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