By Fast Brokers – The Cable predictably bottomed at June 23rd lows, continuing the pattern we notice over the past 10-15 days. The Cable is strengthening along with the EUR/USD as investors divest from the greenback in reaction to China’s repeated request for a new standard currency. However, volume is subsiding to the upside, and it seems the Cable may peak again below previous June highs and our 3rd tier downtrend line. Despite the near-term resilience of the GBP/USD, an immediate-term break above our 3rd tier trend line may be difficult since gains in the Pound are being constrained by comments from the BOE. The BOE voiced concern in its semi-annual financial stability report. Although UK banks have stabilized since the height of the crisis last fall, the financial system remains very vulnerable to any near/mid-term shocks. The cautionary tone from the BOE coincides with that of the Fed and ECB, signaling the global financial system remains in a fragile condition.
Even though gains in the Cable have been tempered lately, the currency pair is trading back above our 2nd tier downtrend line, the more heavily weighted of the three. Additionally, our 3rd tier trend lines are reaching an inflection point today. Hence, there remains the possibility we could witness a little breakout to the upside. We haven’t seen too many hiccups in British economic data, and Britain’s numbers have been more encouraging as compared to the U.S. and EU. Hence, the GBP/USD is well positioned for a breakout to the upside should market conditions improve. That being said, the S&P futures are heading lower as they struggle with 900 while the 30 Year T-Bond futures are adding onto recent gains. Therefore, the GBP/USD’s correlations aren’t moving in favor of the currency pair’s uptrend thus far today. Hence, we wouldn’t be surprised to see the GBP/USD to stay inbounds as the bulls and bears slug it out. The U.S. Dollar is at a crossroads, and it will be interesting to see where investors side. We maintain our neutral stance until the technicals are tested and the trading range broken.
Present Price: 1.6501
Resistances: 1.6315, 1.6371, 1.6412, 1.6702, 1.6768
Supports: 1.6472, 1.6412, 1.6371, 1.6315, 1.6241
Psychological: 1.65, 1.60
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
