GBP/USD Rises Amid Hopes for Greece

Speculation is rampant once again, this time in favor of the risk trade as investors wonder whether Trichet’s early exit from a meeting in Australia to return to the EU implies the union has a solution for Greece’s troubling fiscal situation. However, it seems such speculation may be a bit preemptive and the risk trade could need more concrete fundamental and/or psychological improvements to establish a sustainable turnaround. Meanwhile, we still recognize a considerable downward pressure on the Cable considering the extent of last week’s downturn. Regardless, the bounce in the risk trade is a welcome development for the risk bulls. The Pound is exhibiting a relative weakness today, highlighted by another pop in the EUR/GBP. The UK’s trade deficit widened, registering the largest deficit since March 2009. A weak Trade Balance reading seems to be weighing on the Pound along with overall concern of exposure to Greece’s debt. Although the data wire for the remainder of the trading session is relatively quiet, activity will pick up during tomorrow’s Asia trading session with the release of Australia’s Home Loans data along with New Loans and Trade Balance numbers from China. Furthermore, the UK will print Manufacturing Production during the European trading session along with the much anticipated BoE Inflation report accompanied by a public address from Governor King. Inflation plays an important role in regards to the BoE setting monetary policy. Hence, if prices continue to rise, then investors may deduct that the BoE will be hesitant in tightening liquidity too quickly, especially considering present uncertainty in the EU. Hence, tomorrow could prove to be a busy session for the Pound.

Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/5 highs. We’ve created some new uptrend lines, albeit tight ones, to serve as technical cushions along with the psychological 1.55 area.

Present Price: 1.5636

Resistances: 1.5639, 1.5673, 1.5690, 1.5717, 1.5758, 1.5775

Supports: 1.5572, 1.5558, 1.5533, 1.5502, 1.5470, 1.5444

Psychological: 1.55

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