FOREXYARD: Forex News Blog

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GBP/USD Continues to Recover Posted: 04 Apr 2011 05:30 AM PDT The GBP/USD is strengthening after the late March selling that followed the publication of the UK budget on March 23rd. Today's stronger than expected construction data shows the market may be too pessimistic the British economy and the GBP/USD. The British economy received some good news following the release of the construction PMI in Britain which came in at 55.4, a slight decline from last month's result of 56.5. Economists had forecasted a decline to 54.7. This brought strong bids to sterling. At the opening of the New York trading session the GBP/USD continued to recover to 1.6160 from its opening week price of 1.6110. The much needed support for the British economy comes after a sell-off in the pound following a new high for the GBP/USD and the publication of the UK budget on March 23rd. After the budget release, the GBP sold off across the board despite rising 10-year gilt yields and falling short sterling futures have fallen. Thus, traders expect British interest rates to rise in the near term which should be a positive for sterling. Looking at the GBP/USD, a sell-off occurred following the pair reaching a new high for 2011 at 1.6400 and the pair dropped as low as 1.5935 where the GBP/USD found support near the 100-day moving average (red line). To the downside, the 1.5870 retracement from the January to March move is a viable support, as well as the 200-day moving average (black line) at 1.5850 which could come into play and coincides with the rising trend line off of the May 2010 low. As the GBP/USD continues to recover, the first resistance level is today's high at 1.6180, followed by an initial target at the March high of 1.6400. A breach of this level would then set market players to target the November 2009 high at 1.6875.

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