GBP/USD Daily Commentary for 4.22.09

The Cable has been incredibly volatile today as investors digest important employment data and the CBI’s release of Britain’s budget for the new fiscal year.  The GBP/USD shot up earlier after the Claimant Count Change number came in much better than anticipated. 

However, the currency pair has reversed course after Darling outlined the new budget and reduced his forecast for GDP growth.  Today’s data also comes with a negative asterisk attached since the average earnings data was much worse than expected, signaling consumption could take another big hit.

However, the downturn of the Cable today has much to do with the CBI’s new budget.  Darling described a preference to avoid new economic stimulus measures, meaning if a second wave from the economic crisis does reach shore, Britain may be left without a life raft.  To add to today’s negativity is a very discouraging earnings release from Morgan Stanley.

The bleak earnings report from MS reignites the concern that the troubles for the financials are far from over.  Furthermore, we do now know whether the accounting changes to mark-to-market were responsible for the surprisingly the positive earnings from other major U.S. financials.

Since the financial industry comprises such a large proportion of Britain’s GDP, any setback in financials threatens the stability of the Cable.  The GBP/USD has collapsed beneath 4/20 lows and the psychological 1.45 mark, meaning the losses could pile on towards our 1st tier uptrend line.

Any retracement beyond this trend line could yield incredibly a negative performance from the GBP/USD in the near-term.  We maintain our negative stance on the GBP/USD due to the aforementioned reasons.

Fundamentally, we find resistances of 1.4478, 1.4532, 1.4579, 1.4612, and 1.4677.  The 1.45 area is turning into a psychological barrier with 1.40 acting as a key psychological cushion.  To the downside, we see supports of 1.4438, 1.4391, 1.4362, 1.4319, and 1.4283.   The GBP/USD is currently exchanging at 1.4462.

GBP/USD Daily Commentary for 4.22.09

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