By Fast Brokers – The Cable is gaining back some earlier losses, bouncing off of our 2nd tier uptrend line after being rejected by our 3rd tier downtrend line once more. However, the Pound is experiencing some relative strength despite the weaker than expected realized sales data from the CBI. Today’s CBI number caught us a bit off guard since retail sales came in better than expected last week. At least the CBI reading logged a slight improvement from last week’s release. The Cable is under immediate-term downward pressure along with the EUR/USD as investors react negatively to the mixed 2nd quarter earnings and economic data from today. The S&P futures are halting their precipitous rise as the mixed news gives investors an excuse to take some profits from last week’s run. The Cable is following U.S. equities lower due to their positive correlation. However, the GBP/USD’s uptrend is intact as is the EUR/USD’s. The Cable remains above our 2nd tier uptrend line with 7/27 lows and our 1st tier uptrend line ready to defend should they be called upon. Furthermore, the GBP/USD hasn’t experienced any heighted activity on the sell-side thus far today, so investors should keep an eye on volume.
Despite today’s resilience in the Cable, Friday’s much weaker than expected GDP from Britain spooked Cable investors a bit, negating progress made by higher retail sales and mortgage approvals data. However, sentiment concerning the GBP/USD could improve as the week progresses since Britain should continue to show positive progress in unemployment and pricing. Therefore, the discouraging GDP figure could be brushed aside for the time being. Upside movements in the Cable could be limited with the S&P futures approaching their highly psychological 1000 level. It’s interesting that neither the GBP/USD nor the EUR/USD participated in Thursday’s key breakout to the upside in U.S. equities. The Cable’s lack of correlation could indicate an immediate-term downward tendency, and it may take a 1000+ S&P for the GBP/USD to crack June highs. Hence, with 1000 looming overhead and the S&P surging 11% last week, U.S. equities may have overheated. If this is the case, the Cable would likely follow a pullback in the S&P.
Britain will release net lending data tomorrow, and investors will look to see if banks are letting more liquidity flow to small businesses and individuals. Altogether, the GBP/USD’s uptrend is healthy despite today’s setback. Unfortunately for the bulls, the Cable’s battle with the psychological 1.65 area lives to see another day. The GBP/USD should continue to log limited gains until 1.65 and our 3rd tier downtrend line are overcome.
Present Price: 1.6439
Resistances: 1.6441, 1.6467, 1.6500, 1.6542, 1.6555
Supports: 1.6405, 1.6372, 1.6347, 1.6324, 1.6301
Psychological: 1.65
Market Commentary provided by Fast Brokers.
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