Sep
2
2010

 

GBP/USD Underperforms in the Wake of Weak Data

The Cable is underperforming in the midst of a rally in the rest of the risk trade.  The Pound is being punished in reaction to comparatively weak UK fundamentals.  Weaker than expected manufacturing and construction PMI’s along with a discouraging decline in home prices has wiped away the optimism generated from last week’s positive UK GDP data.  However, despite the recent wave of negative UK data the Cable is still holding above August lows as investor uncertainty subsides in the wake of better than expected manufacturing PMI data from both the U.S. and UK.  The U.S. economy was in dire need of some good economic news and bulls got what they were waiting for yesterday, driving the S&P futures higher by nearly 3% after manufacturing PMI printed at 56.3 vs. 53.2 expected.  However, despite the positive turn substantial downward pressure remains as uncertainty increases regarding the sustainability of the global economic recovery.  Hence, we’ll have to wait and see whether the risk trade can post a confirmation rally by the end of the week as more heavily-weighted news and data flows in.  Investors are presently looking ahead to the ECB’s monetary policy decision followed by U.S. pending home sales.  Activity will peak on Friday with the U.S. printing headline employment data.  Should the news and data continue to improve then the risk trade may be able to add onto fresh upward momentum and resurface from the summer doldrums on a positive note.    

Technically speaking, the Cable has supports in the form of intraday and 8/31 lows.  Additionally, the psychological 1.55 level could continue to have a noticeable influence over near-term movements in the Cable.  As for the topside, the Cable faces technical barriers in the form of intraday and 9/1 highs. 
Present Price: 1.5390
Resistances: 1.5398, 1.5419, 1.5449, 1.5472, 1.5503, 1.5530
Supports: 1.5374, 1.5342, 1.5322, 1.5298, 1.5274, 1.5252
Psychological: 1.55, August Lows
 
 
 

 
Posted by: Matthew Myers

 

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