As with the EUR/USD, the GBP/USD recovered well from Friday lows considering the uncertainty surrounding Dubai's debt situation. Although analysts are still trying to clarify the details of what has occurred, the Cable managed to piece together a solid rally back above our 1st tier uptrend line. However, the GBP/USD is drifting lower again after the bounce topped off at our 2nd tier downtrend line and 10/29 highs. The Pound is still experiencing relative weakness, highlighted by today's solid performance thus far by the EUR/GBP. The Pound's weakness stems from both GfK Consumer Confidence and Net Lending to Individuals printing below analyst expectations. Additionally, BoE Governor King's latest comments regarding the central bank's present monetary stance were a bit more opaque than what investors were looking for. As a result, the Cable is being dragged lower while investors figure out where to send this market as the Dubai situation unfolds.
Meanwhile, the data train will keep on rolling with China's Manufacturing PMI late Monday EST followed by the RBA's monetary policy decision. A strong China PMI number coupled with a hawkish stance by the RBA could help turn the Cable and the risk trade around. Britain will release Manufacturing PMI data of its own on Tuesday coupled with Nationwide and HPI numbers. Nationwide was recently a bit cautious concerning its outlook for UK housing prices in 2010, therefore it will be interesting to see how tomorrow's HPI release turns out.
Technically speaking, the Cable's more critical technical levels seem to be previous November lows along with our 1st tier uptrend line. Hence, the Cable's pop from Friday lows have helped create some breathing room to the downside. Our 1st tier uptrend line runs through October lows, meaning a failure of our 1st tier could potentially result in a retracement towards the 1.57 area. As for the topside, the Cable faces multiple downtrend lines along with 11/25 highs and the psychological 1.65 level. Hence, there are quite a few near-term topside obstacles, and the immediate-term goal for bulls will likely be continued stabilization with a topside preference.
Present Price: 1.6446
Resistances: 1.6468, 1.6489, 1.6532, 1.6568, 1.6596, 1.6634, 1.6673
Supports: 1.6409, 1.6359, 1.6327, 1.6301, 1.6285, 1.6251, 1.6235
Psychological: 1.65, November Lows and Highs