By Fast Brokers – The Cable is popping right now after the UK’s Claimant Count Change unexpectedly dropped by -6,300. The Pound is outperforming in reaction to the positive employment data, as highlighted by a brisk pullback in the EUR/GBP. Meanwhile, investors are awaiting the release of U.S. Building Permits along with its CPI data followed by the Fed’s monetary policy decision later in the afternoon. Although the Fed is likely to keep its monetary policy unchanged, investors will be paying close attention to the Fed’s wording to monitor whether the central bank takes a more hawkish stance in light of positive developments in U.S. unemployment and consumption data. Bernanke reiterated the Fed’s present commitment to its loose monetary policy the last time he spoke following encouraging employment data. Hence, it could be a risk to expect the Fed will alter its stance less than two weeks later. That being said, any unexpected action from the Fed would likely yield noticeable volatility due to the psychological influence of central banks on the FX markets. Regardless, activity could pick up in the next 24-48 considering the wealth of data and news investors will be digesting.
Meanwhile, should upcoming U.S. data print mixed or negative the Cable could tack onto intraday gains since the argument from a tighter Fed monetary policy may lose some of its luster. The UK will keep the data train rolling tomorrow with the release of key consumption data, including Retail Sales and CBI Realized Sales. If UK consumption picks up faster than anticipated, this could be a positive catalyst for the Cable since investors may expect a more conservative monetary policy stance from the BoE.
Technically speaking, the Cable has created some breathing room between present price and our key 2nd tier uptrend line. Our 2nd tier uptrend line runs through October lows, implying a retracement towards the 1.58-1.60 area should it give way. Below our 2nd tier uptrend line the Cable does have our 1st tier uptrend line (off chart) serving as a technical cushion along with the psychological 1.60 level, September lows and October lows. As for the topside, the Cable has been negated thus far today by our 1st tier downtrend line and faces multiple downtrend lines along with 12/9 and 12/7 highs. Furthermore, the psychological 1.65 level could serve as a technical barrier should it be tested.
Present Price: 1.6356
Resistances: 1.6371, 1.6399, 1.6421, 1.6439, 1.6472, 1.6494
Supports: 1.6337, 1.6325, 1.6304, 1.6282, 1.6257, 1.6223
Psychological: 1.60, 1.65, September and October lows
Market Commentary provided by Fast Brokers.
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