The sterling came under further pressure today following the release of June UK CPI which decreased to 4.2% yearly while the markets were waiting for 4.5% like April and May. The cable has reached today 1.578 after breaking 1.5911 yesterday and falling further can be met by supporting level at 1.5744 and breaking below it can lead to test 1.5342 whereas it could form its bottom to 1.6744 while going up from here now can be met by resistance at 1.614 can be followed by another resistance at 1.6261
From anther side, the greenback could add to its gains underpinned by falling of the markets risk appetite weighing down on the equities markets by worries about the US labor market and growing concerns about the Italian financial situation containing the market sentiment while Greece is still facing default despite its governmental succeeding in having the parliament confidence and approving on its new austerity measures which forced the single currency to fall below 1.4 reaching 1.3837 today before finding support by the announcement of having an EU summit this Friday and after succeeding of Greek bond auction and also another Italian bonds auction but it was expensive on the current increasing worries about Italian's debt which came down also with approving of the opposing middle left party in Italy of taking austerity measures for reducing the budget deficit helping the single currency again rebound getting over 1.4 versus the greenback which has come under pressure by bigger than expected trade balance deficit release of May reaching $50.2B from 43.6 while the market was waiting for just 44B.
God willing the single currency next supporting level versus the greenback is at 1.3837 after breaking below 1.3965 and 1.3854 supporting levels this week and falling further can be met by further supporting levels at 1.3523 then 1.3424 while rising from here can face resistance at 1.4077, 1.4224 and 1.4337
The markets are waiting ahead today for the release of the Fed's recent meeting minutes which are waited to show the markets why the Fed has not decided to inject more funds and also the markets want to know more from these minutes about the current Fed's appreciation of the growing inflation pressure in US and whether or not it was the reason behind this decision.
Kind Regards
FX Market Strategist
Walid Salah El Din
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