By Fast Brokers – The Cable is struggling to break free of its near-term topside barriers as the EUR/USD tumbles towards its May lows with negative psychological forces hitting the FX markets from the EU to China. The FTSE is down over -2% along with DAX and CAC after China’s manufacturing PMI release came in below analyst expectations, igniting speculation of a slowdown in China amid tighter real estate policies. Li Daokui, a member of China’s central bank policy committee, suggested that China’s property bubble could be worse than America’s due to the possibility of social unrest. For further analysis on this topic, you can read my blog post last week ‘Year of the Tiger’ at www.blogs.fastbrokers.com/matthew. Additionally, the ECB warned that there could be another $240 billion worth of writedowns at major EU banks in the pipeline. Speaking of pipelines, BP is down over -12% today after the U.S. government estimated that the oil leak could go unplugged until August. Public discontent is rising over the adverse affects from the spill and investors likely expect BP will have to foot a large portion of the bill. Hence, after a calm week it seems negative psychological headwinds are picking up again. The Cable is holding up relatively well considering the extent of the pullback in the Euro, and till be interesting to see if the GBP/USD can hold May lows. UK Manufacturing PMI came in about in line with analyst expectations and investors are still waiting on Halifax HPI. Attention will now shift to the U.S. with its own manufacturing PMI number ready to hit the wire.
Technically speaking, the Cable faces multiple downtrend lines along with intraday and 5/28 highs. Additionally, the psychological 1.45 area could continue to serve as a solid barrier over the near-term. As for the downside, the Cable has support in the form of intraday and 5/20 lows. Furthermore, the psychological 1.42 level could serve as a technical cushion if it’s reached.
Present Price: 1.4467
Resistances: 1.4498, 1.4521, 1.4543, 1.4584, 1.4626, 1.4671
Supports: 1.4432, 1.4409, 1.4387, 1.4359, 1.4326, 1.4301
Psychological: 1.42, 1.45, May 2010 and February 2009 lows
(click chart to enlarge)
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