British Pound Up Against US Dollar On Better-Than-Forecast Consumer Confidence Report

The Pound appreciated against the Dollar after GfK Consumer Confidence came in above analyst expectations and British retailing giant Marks and Spencer reported an improvement in earnings.  The GBP/USD proceeded to experience considerable strength from our medium-term downtrend line, and is fighting towards our 2^nd tier uptrend line as we type.  The bounce in the Cable is encouraging considering it happened comfortably above our 1^st tier uptrend line.

However, the rally is fueled mostly by oversold conditions since we don’t view the above-mentioned news as game-changing.  Additionally, the up-bars and supported by insufficient volume.  U.S. financials are still in serious trouble, applying downward pressure on equities.

Considering the financial industry comprises nearly 25% of Britain’s GDP, another setback in U.S. financials would likely have negative repercussions for the British economy.  Britain and America are coupled, and both central banks are implementing quantitative easing.  Hence, it’s difficult to place one’s full weight behind an uptrend in the GBP/USD.

Regardless, the near-term uptrend is beating out our medium-term downtrend for the time being.  Therefore, we will have to see how the trend plays out with the much-anticipated G20 Summit approaching.

As with the EUR/USD, we anticipate the GBP/USD staying true to its positive correlation with U.S. equities.

Fundamentally, we find resistance of 1.4326 with additional resistances hanging at 1.4362, 1.4398, and 1.4437.  The 1.45 area will serve as a psychological barrier with 1.40 acting as a highly psychological cushion.  To the downside, we see supports of 1.4283, 1.4240, 1.4208, 1.4159, and 1.4100.   The GBP/USD is currently exchanging at 1.4298.

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