Since two weeks ago, risk aversion was the main theme of market sentiment which saw GBP/USD falling in line with EUR/JPY that was precipitated with heavy fall in Friday on the US Non-Farm Payroll data that came out positive but the gain was not as much as expected.
Over in the Euro Zone, a government official said that Hungary’s economy was in a “very grave situation.” There were concerns that the crisis was spreading to Eastern Europe.
By Tuesday, GBP recovered but not before first falling to the low of previous week’s Monday and then finding support at Monday two weeks ago London's low. It seem that market felt Hungary is not the next Greece.
Report of China's exports increased by quite a bit during mid-week reversed the market sentiment, from risk aversion to risk acceptance. This suggested that global trade is still functioning and sentiments improved. It is apparently clear that the People's Republic of China and it's People's economy will lead the way out of the global recession.
Cable breached the descending channel, went for the upside to break the resistance at 1.4627 and going for the previous high. The lower line of the ascending channel capped the bullish cable. The UK released of its industrial and manufacturing production data on Friday, showing that they fell worst than market expectation. The downbeat data caused the GBP/USD to decline that by the end of the week cable has retraced all the gains achieved on Thursday.
Cable in my perspective is still bullish and at current stage it is consolidating. With market close at 61.8% retracement an appreciation in the pair will tested the previous high at 1.4768 and the next resistance at 1.50. Tracking downward, support is at previous low and drifting beyond 1.42 will reversed my bullish perspective of the pair.
