After green opening of the US session the US indexes have retreated back diving in the red territory following dovish assessment of the labor market performance by the Fed's chief in his semi annual testimony in front of the Senate Banking Committee.
The Fed's chief had clarified that the Fed's is ready to take further easing steps to support the economic activity with context of the price stability as the progress in reducing the unemployment is likely to be frustratingly slow as he said but he has not delivered again any clear idea about such steps that could be taken by the Fed in the future by God's will to stimulate the growth which is looking negatively impacted by losing confidence and expected to growth by a rate below 2% in the second quarter of this year as he expected because of the debt growth and the slow global economic growth which has been revised down for this year recently by the IMF to be 3.9% from 4.1% in its previous estimation.
He has not forgotten to assure again on the need for unsustainable path and a credible plan to lower the Governmental deficit over the long term avoiding putting more pressure on the economic activity which is already suffering from slowing down with new spending cuts and tax increases ahead to be implemented with the beginning of next year.
The greenback could press the British pound down following this speech to be traded below 1.56 which held on overnight following the dovish release of US retails sales broad figure of June which came down monthly by 0.5% while the market was waiting for rising by 0.2% after decreasing in May by 0.2% and also the figure excluding the auto sales has shown the same pace of declining of May by 0.4% monthly while the consensus was referring to unchanged figure.
The British pound has faced pressure from another side by the strong declining of UK CPI in June to 2.4% y/y while the market was waiting for 2.8% as the same as last May suggesting further easing steps to come following the Stg50b which has been added to BOE's assets purchasing program on the 5th of this month to rise to Stg375b with no fear of the inflation upside risks which are looking benign with the economic contraction by 0.3% quarterly 0.1% yearly in the first quarter of this year.
God willing, the cable can meet now supporting level at 1.5516 which could hold yesterday and in the case of breaking it, there can be a possibility again for facing 1.5412 before meeting 1.5391 while rising back from here can be faced by a resistance at 1.5678 whereas it has managed to stop rising this week falling to this current level and in the case of breaking it, there can be another resisting level at 1.5722 before 1.5777 which was the highest level it has reached following falling to 1.5266 on the first day of last June.
FX Market Strategist
Walid Salah El Din