Upbeat U.K. Data Supports The Cable

Includes: FXB, UDN, UUP
by: FXstreet

The British pound benefited from U.K. economic data, as even though it reported a wider-than-expected trade deficit, the focus was on a positive surprise on the industrial production figure.

But data could provide the Cable only temporary support, as despite risks of a U.K. triple-dip recession receded, they persist. In this regard, the BNP Paribas Economic Research team notes that the increase in industrial production is good news but "activity remains penalized by the weak global economic growth".

So, what can we expect from GBP/USD?

Commenting on the GBP, in a separated research article, BNP notes that its own measure of relative inflation expectations (UK-US) suggests GBP/USD should be trading below 1.5000, and says this indicator has been a good guide over recent months, so it would favor selling rallies to the 1.5350-1.5400 area.

On the other hand, the TD Securities analyst team commented that positive data helped boost the GBP and adds to constructive price action that has evolved slowly since mid March. "We continue to be broadly more positive on the GBP for the coming months", TD analysts said.

GBP/USD has entered in a consolidation phase around 1.5300 after peaking at 1.5363 last week in the wake of the U.S. NFP data. From a technical view, the pair maintains the bullish tone in short-term charts, although indicators are losing strength. The Cable would need to decisively break above its recent peak at 1.5365 in order to confirm a bullish continuation with 1.5400 in sight, where the psychological level and the 38.2% retracement of the 1.6337/1.4830 drop converge.

Meanwhile, loss of the 1.5250/40 area could open the way for a deeper correction toward 1.5185 and then 1.5100.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.