The GBP/USD is battling to stay above previous September lows in order to forgo another negative technical development. Bulls are swooping in and buoying the Pound across the board; notice topside consolidation in the EUR/GBP. Sterling has taken a beating over the past couple sessions after BoE Governor King's dovish most recent dovish statements finally sank in. However, investors may opt to keep the GBP/USD above September lows and avoid a retest of the highly psychological 1.60 level until we see whether the BoE follows through on King's dovish contemplations. Meanwhile, there is heightened uncertainty regarding the extent of the BoE's dovish behavior. Although investors have priced in further liquidity measures, it remains to be seen how aggressive the monetary policy will be. On the other hand, any hesitation or lack of action by the BoE would likely result in a huge rally in the Cable. Britain's economic data wasn't so bad last week, employment and pricing data printed in line or above analyst expectations. Therefore, the GBP/USD's relentless weakness clearly took its cue from King's psychological monetary shock. Britain won't be releasing much noteworthy econ data this week, leaving the GBP/USD's performance up to the BoE's monetary policy decision, U.S. equities, and the psychological forces surrounding the G20 summit. Hence, investors should pay close attention to the behavior of the S&P futures and their interaction with our 1st tier uptrend line and 9/15 lows should they be tested.
The technical key will be for the Cable to stay above September lows and the highly psychological 1.60 level should the pullback continue. As for the topside, the Cable faces multiple downtrend lines and the 1.65 level becomes a psychological barrier once again. The Cable is skating on thin ice now since we're running low on uptrend lines. Therefore, this week's trading could play a large role in determining whether we are witnessing the beginning of a more protracted pullback in the market.
Present Price: 1.6171
Resistances: 1.6181, 1.6202, 1.6225, 1.6238, 1.6258, 1.6288
Supports: 1.6151, 1.6142, 1.6113, 1.6094, 1.6071
Psychological: 1.60, 1.65