NEW YORK (Forex News Now) – Monthly manufacturing production numbers for the UK were on the light side this morning coming in at a 0.1% increase as opposed to the expected 0.3%. However, it should be noted that the previous month’s number was revised upward from 0.3% to 0.4%, cushioning the blow.
Also out this morning was the trade balance numbers for the UK which also came in weaker than expected at -8.2 billion GBP, as most analysts expected a number of -7.9 billion GBP. Previous number was also revised downward to -8.5 billion instead of the previously reported 8.2 billion. The industrial production numbers were also released this morning and they came in at 0.4%, 1/10 of a percent short of estimates. However, last month’s numbers were revised upward 1/10 of a percent, making it a washout.
Even with the economic releases this morning, it appears that FX traders are focusing on the technical setup of cable more so than the economic fundamental numbers underlying it. As you can see from the chart below FX traders have been buying the British pound recently, and selling the US dollar. It appears that this trend will hold, as the significant 1.60 level has proven itself to be a valid support area today.
Drawn on the chart below, is a significant triangle that has recently been broken. The top of the triangle was the 1.60 mark, which price as tested today and validated. FX traders have been buying this pair of in European trading this morning.
It is believed that with Britain’s austerity measures, and the US still an easing environment, that FX traders will favor the British pound over the US dollar for the foreseeable future. Based upon larger support and resistance levels on the weekly chart, the cable could run all the way up to the 1.68-1.70 resistance area.