By Fast Brokers – Yesterday’s UK Services PMI number printed in line and today’s Halifax PMI came in slightly above expectations, creating a positively mixed environment for the Pound. The Pound has gained a little strength in reaction as the EUR/GBP starts to top out. However, the Cable has given back most of January’s gains and is trying to stabilize above our 2nd tier uptrend line and 12/30 lows. Despite today’s attempt to set a bottom, there remains a downward force bearing down on the Cable. We witness similar behavior in the EUR/USD while the USD/JPY pops. Hence, the FX theme seems to be one of broad-based Dollar strength. However, the question is whether the Dollar is gaining its strength from an inclination to head for safety. The improvement in Western economic data seems to be tapering off, placing more weight on tomorrow’s U.S data set. The U.S. will release its headline Unemployment Rate and Employment Change figures and the data could prove to be a market mover. Investors should keep in mind that December’s Dollar rally was trigger by a turnaround in U.S. employment data. Hence, if tomorrow’s data prints better than expected we could witness another wave of Dollar buying, a negative development for the Cable. On the other hand, disappointing employment numbers could add to speculation that the Fed will maintain a loose monetary policy for a while and allow the Cable to challenge some of our downtrend lines. In addition to tomorrow’s U.S. data, the UK will release PPI. The BoE kept its monetary policy unchanged as anticipated, indicating the central bank is keeping a close eye on inflation to determine whether to scale back some of its QE measures at its next meeting. Hence, it will be interesting to see how tomorrow’s UK PPI turns out.
Technically speaking, the psychological 1.60 level is serving as a technical barrier once again along with our multiple downtrend lines and January highs. As for the downside, our near-term technical cushions are wearing thing with our 1st and 2nd tier uptrend lines sitting nearby along with December ’09 lows. December’s downturn was a key development for the Cable. Hence, if our present technical cushions don’t hold the Cable may fall back towards September ’09 lows.
Present Price: 1.5930
Resistances: 1.5973, 1.5995, 1.6024, 1.6058, 1.6085, 1.6107
Supports: 1.5928, 1.5901, 1.5876, 1.5848, 1.5823, 1.5789
Psychological: 1.60, December highs and lows, September lows
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