The Cable has deflected twice from our 3rd tier uptrend line as the psychological 1.65 level looms overhead. The Cable continues to underperform against the EUR/USD, exemplified by an upturn in the EUR/GBP. The Pound’s relative weakness comes despite a better than expected CCC and average earnings data as compared to the Euro’s disconcerted showing in economic sentiment and industrial production.

Meanwhile, the Cable has fallen into a pattern of consolidation over the past 24 hours. The GBP/USD is struggling with the dense June trading range as we anticipated. The Cable’s large near-term technical obstacles could be adding to the Pound’s relative weakness. Volume has been pretty tame to the upside. The GBP/USD likely needs a shot of considerable buy-side volume to vault the currency pair past our 3rd tier uptrend line and 1.65. Even if the Cable should make it beyond these barriers, the GBP/USD still needs to deal with our 3rd tier downtrend line and June highs. Hence, the Cable has its work cut out for it to the upside.

Second quarter earnings continue to come in better than analyst expectations. JPMorgan joined the pack today by eclipsing analyst estimates with tech heavyweights IBM and Google reporting later on. Investors have been highly anticipating the 2nd quarter earnings season to get a better picture of the state of corporate performance among the global economic stabilization taking place data-wise.

If earnings should continue to outperform estimates, the Dollar should continue to depreciate against both the Pound and Euro barring any external shock. Speaking of which, investors should monitor the CIT situation to see whether a bankruptcy would have systemic implications. Any large systemic shock could have a destabilizing effect on the GBP/USD’s uptrend. However, any CIT predictions at this point are merely speculation, and the concrete data and earnings of this week are spinning the GBP/USD’s story in a positive light. Investors should also keep an eye on the interaction of the S&P futures with their July 1st highs since the two investment vehicles are positive correlated. 

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