Sterling took a battering of its own on Friday after the US data, falling sharply to 1.5031 and looking likely to test the important 1.5000 level in the days ahead. It will not be helped in the weeks ahead either, by the concerns over the chances of a hung Parliament at the May 6 election or the possibility of a UK exit from the EU if there is a referendum once the next parliament is elected. The Tories need an outright win in order to deliver PM Cameron’s promised referendum, although the polls do not suggest that this is likely to happen and that UKIP could well hold the balance of power, with seats also going to the SNP and the Greens. Meanwhile, in the next few days, Cable is likely to be driven by offshore leads given the comparative lack of domestic UK data this week.Cable took out most of the interim support levels on Friday but has managed to hang on to 1.5000, a break of which would send it to the minor double bottom (31 Jan/3 Feb) at 1.4987 and then to the previous trend low of 1.4951 (23 Jan). A break of this would then head to the import Fibo support at 1.4918 (61.8% of 1.3502/1.7191) which should hold it for a while, but below which would want to take a look at the July 2013 low at 1.4813. The base of the channel is at 1.4600 and given the look of the daily indicators it seems to be a realistic target.
On the topside, after Friday’s steep decline there is not an awful lot of resistance until the Fibo resistance at 1.5152 (23.6% of 1.5551/1.5031), although 1.5100 will see interim sellers. Beyond 1.5150, Friday’s high was at 1.5254 and I guess that we could at some stage want to revisit this area, although it seems a very long way off now.
As elsewhere, look for further levels to buy dollars in the week ahead.
Economic data highlights will include:
W: UK Industrial Production, Manufacturing Production, CB Leading Economic Index NIESR GDP Estimate,
T: UK Goods Trade Balance
F: BOE Quarterly Bulletin.
Meta Trader – AxiTrader GBP/USD: Daily
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