Current Price	2010 open	YTD change	Month Open	MTD change
£-usd	1.5490	1.6168	-4.0%	1.4957	+3.7%
£-eur	1.1975	1.1283	+5.8%	1.2234	-2.4%
£-chf	1.6290	1.6732	-2.8%	1.6133	+0.8%
£-jpy	135.35	150.44	-10.3%	132.39	+2.0%
£-aud	1.7255	1.8006	-4.5%	1.7770	-3.3%
£-cad	1.6035	1.7030	-6.0%	1.5904	+0.6%
eur-$	1.2935	1.4329	-9.3%	1.2226	+6.3%

 

Continued improvement in risk appetite sent the dollar lower across the board yesterday. The fallout from Friday’s EU bank stress tests was minimal and seems to have been taken at face value, at least for now. Much stronger than consensus US new home sales added to the improving sentiment although weaker manufacturing activity reports from both Chicago and Dallas point to a weaker Richmond index today. The 23.6% gain in new home sales was the largest monthly gain in 30 years but coming off an exceptionally low base, the headline data does not paint the full picture in the housing sector which remains painfully weak. Consumer confidence in the States is also seen slipping further with potential for a break below the 50 level if recent weak confidence indicators are anything to go by. 

The pound continues to benefit from last week’s strong GDP data although Thursday’s consumer confidence release has the potential to take some of the shine off a result which is unlikely to be repeated in H2.

In the wake of the EU bank stress test results, credit default swaps came lower helping the euro recover to retest the psychological 1.30 level against the dollar.

 

Cable traded to 1.5520 yesterday, its highest level since mid April but was unable to push on to test the 200 day moving average, now at 1.5556. The 1.5520/55 area is likely to provide stiff resistance, at least on initial attempts with momentum studies showing clear bearish divergence. This in itself does not mean we are about to turn back lower, but the signals do warn against an outright bullish stance at current levels. Only beyond 1.5555 clears the way for gains to 1.5640. Support today at 1.5470, 1.5450, 1.5425, 1.5370 and 1.5325. More important support sits back at 1.5220.

£-eur 

 

The pound is currently being drawn to the 55 day moving average at 1.1935 like a magnet, having traded here each of the last 5 days. Resistance at 1.2025 stayed out of reach yesterday, and together with 1.2060, needs to be cleared to shift near term bias in favour of bulls again. Next resistance then at 1.2135, 1.2235 and 1.2395. Support today also unchanged from yesterday with 1.1905, 1.1880/70, 1.1835 and 1.1790 the levels to watch ahead last week’s 1.1720 low.