GBP/USD Daily Commentary for 4.24.09
The Cable is recovering from earlier losses in reaction to a worse than expected Prelim GDP release from Britain. The Prelim GDP number shows the British economy is indeed in worse shape than anticipated as the nation’s production gets punished for its heavy reliance on financial services. Moody’s highlighted the dismal situation by warning Britain’s AAA credit rating may be in jeopardy due to the nation’s unprecedented over-reliance on debt to keep its economy afloat.
A loss of its AAA rating would raise the interest payments Britain must pay on its debt, only increasing the overall burden on the economy. Bad news aside, the Cable is reacting in a more positive manner than one would anticipate after such negative developments. The GBP/USD is finding strength in better than expected business climate data from the EU and durable goods orders out of the U.S.
The Cable has bounced off our 2nd tier trend line and could realize some substantial gains should it brave above yesterday’s high. The resilience of the GBP/USD is highly reliant on the performance of U.S. equities to counter the bad news from Britain. With the S&P futures flirting with the possibility of another breakout, the Cable may be inclined to participate due to the positive correlation.
Fundamentally, we find resistances of 1.4730, 1.4773, 1.4826, 1.4864, and 1.4904. To the downside, we see supports of 1.4677, 1.4612, 1.4567, 1.4532, and 1.4481. 1.45 serves as a psychological cushion with 1.50 acting as a key psychological barrier. The GBP/USD is currently exchanging at 1.4687.
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