On Tuesday, in the early session GBP/USD consolidated at 38.2% retracement of previous week's swing high and low at 1.4475 before breaaking sharply upward one hour before Frankfurt open. The pair then corrected downward testing the 50% retracement at first hour of London open. Price reversed upward with help from solid economic data. PMI manufacturing was unchanged at 16 year high of 58. According to Land Registry report, home prices rose 8.5% yoy from a year earlier, the fastest pace since September 2007. This was further boosted by speculation that Prudential's takeover of AIG's Asian unit may fail. The news boosted UK stocks.
Dollar reversed earlier against as solid US data lifted risk appetite in US session. ISM manufacturing index dropped slightly from 60.4 to 59.7 in May but that was better than expectation of 59.4. This also marked the tenth consecutive month of expansion reading. The details were also solid with employment component jumped to 59.8, highest level since May 2004, which gave some hope of a strong non-farm payroll reading on Friday.
Exports also increased to 62, highest level since December 1988. On the other hand, construction spending rose sharply by 2.7% mom in April, strongest reading since 2000.
DOW rebounded strongly from intraday low of 10038 while crude oil also rebounded from intraday low of 71.64. Dollar index, on the other hand, failed to sustain above 87.46 resistance and pull back to 86.5 level.
GBP penetrated the 138.2% extension of Monday swing high and low indicating a short term bullish trend.
1.4546 is now support for the downside, with a penetration of that level the next major support at 1.4434.
On the upside, the immediate resistance is at 1.4829.
