The GBP/USD is finding support in our 2nd tier turned 3rd tier uptrend line once again as the Greenback depreciates across the board. The Dollar's broad-based depreciation is a bit odd considering the crude and the S&P futures are moving lower today in reaction to the SCI's freefall during the Asian trading session. Since we haven't witnessed any discernable deterioration in economic data today, we are attributing the S&P's decline as a psychological reaction to the downturn in the SCI. Hence, investors should refrain from reading too far into the S&P's present pullback. We can tell you theme today is one of a weaker Dollar, highlighted by large gains in the EUR/USD and losses in the USD/JPY. Meanwhile, gold is caught in the headwinds with little sense of direction.
Investors are becoming more comfortable with the GBP/USD after Britain's GDP number came in one basis point above expectations on Friday. However, investors should keep in mind the rest of Britain's data was disappointing, including disconcerting outlooks for both consumer sentiment and business investment. As a result, the Pound continues to experience a relative weakness, signified by the incessant rise of the EUR/GBP. Britain will have a chance to redeem itself tomorrow when it releases its Halifax HPI, Manufacturing PMI and Net Lending to Individuals data points. While we expect the Halifax data to impress since British housing data has been a bright spot lately, the more significant event will be to see whether Britain's Manufacturing PMI can expand on its return to growth. If so, the Pound may receive a boost of buy-side activity.
Technically speaking, the GBP/USD must deal with our 2nd and 3rd tier downtrend lines along with 8/28 highs. After these technical barriers, the currency pair should have a clear shot at its psychological 1.65 level. However, even if the Cable's upward momentum should carry the currency pair beyond these resistances, we can create many more downtrend lines if need be. This is the price the Cable must pay for experiencing such an aggressive pullback over the past month. Britain's mixed data won't cut it, and the GBP/USD will need an impressive showing on all fronts to piece together a more meaningful rally. As for the downside, the Cable has a little our 2nd and 3rd tier uptrend lines along with 8/27 lows to fall back on. If these technical cushions don't hold, the GBP/USD should experience considerable support in its psychological 1.60 level. Meanwhile, investors should take note that our 3rd tier uptrend line is reaching an inflection point with our 1st and 2nd tier downtrend lines over the next 24-48 hours, indicating a forthcoming area of high volatility. The multiple inflection points are not surprising considering the important British data hitting the wire soon.
Present Price: 1.6277
Resistances: 1.6294, 1.6313, 1.6340, 1.6379, 1.6416
Supports: 1.6251, 1.6212, 1.6181, 1.6146, 1.6119
Psychological: 1.60, 1.65