GBP/USD Wavers Around Friday Lows
The Cable is hovering around Friday lows after continuing its extensive decline in the wake of strong UK PPI data. Friday’s resurgent PPI data couples with a similar CPI reading, indicating a pop in prices which could discourage the BoE from tightening liquidity. However, Mervyn King recently stated that the central bank is not overly concerned about the recent rise in prices and implied that it is not indicative of a more lasting trend. Regardless, there are many other reasons for the BoE to take a wait and see approach, including economic uncertainty in the EU and liquidity tightening in China. Therefore, the Cable showed little hesitation in participating with last week’s route from the risk trade. The risk trade will be relatively quiet for the next 24 hours, giving the risk trade an opportunity to calm down as analysts and investors assess the damage. However, the data wire will begin to heat up again during Wednesday’s Asia trading session with key economic data releases from China and Australia. Furthermore, the BoE will release its inflation report accompanied by a speech from King. Meanwhile, investors should keep an eye on the news wire for any significant news concerning Greece and other troubled EU economies. As we saw last week, developments in these countries can yield high volatility in the FX markets.
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: 1.5584
Resistances: 1.5601, 1.5639, 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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