GBPUSD Analysis Update 26th June 2012

• The pound/dollar currency rate has dropped under the recently formed price channel as can be seen on the daily timeframe chart below.  As a result of this the “cable” is heading towards the 1.5500 round number area, if price can first break through the 50% retrace level around 1.5540.
• David Miles, the BoE policymaker spoke out and suggested that £50 billion plus is required in order to boost the British economy. Miles actually voted in favour of additional QE last time out.  The market could now be pricing in the potential for further QE measures.
• GBP/USD is under pressure as broad based USD strength is seen across all markets.  Additional weight on sterling sentiment could also be seen as ratings agency Standard & Poor’s stated that official growth forecasts in Britain are unrealistic.
• This pair remains sensitive to news from the EU.  Today has seen Spain, Cyprus, Greece and Italy under the spotlight once again and a strong dollar scenario has prevailed. The U.S. 10-year yield was down over 4% on the day and dropped by the most seen in more than a week as market participants looked for a safe haven in the face of continued uncertainty. The US 10-year yield dropped seven basis points to 1.60%.
• We see GBPUSD 1.5500 as being a key level in the near term and further to this is the 1.5300 area which has seen previous demand when referencing the higher time frame charts.  Any upside move may find resistance around the 1.5650 level as this has proved to be a price pivot on numerous occasions.  Ultimately events in Europe are leading the price action at present and the EU summit this week looks to be the primary event risk.