The Cable peaked above the psychological 1.65 level and our 3rd tier trend lines after BBA mortgage approvals and retail sales exceeded analyst expectations while U. S. equities surged to new 2009 highs. However, the GBP/USD has reversed quickly after Prelim GDP came in 5 basis points below expectations (-0.8% vs -.03%E).

Additionally, the previously released number was revised lower from -1.9% to -2.4%. Today’s negative GDP data suddenly increases speculation that the BoE will need to expand its $125 billion QE package at the next policy meeting. Before making an emotional reaction, we do point out that even though British production, manufacturing, and services data points have been mixed/disappointing, the unemployment rate and consumption have improved by leaps and bounds.

Hence, the negative data points we’re seeing from on the GDP side may be lagging behind an improving employment market. Furthermore, even though today’s Prelim GDP missed expectations and may be revised lower next time, today’s number is certainly a nice improvement from before (-0.8% vs -2.4%). Therefore, we suggest investors exercise caution before becoming too negative on the Cable.

Meanwhile, it will be interesting to see if the Cable can recover from our 2nd tier uptrend line. If so, the GBP/USD can retain its theme of a slow, volatile upward sloping trend. The Cable is constructing an incredible foundation in the process, with pillars standing at 6/8 and 7/8 lows. We knew the meat of the June trading range would be challenging. What matters for swing bulls is that the GBP/USD is looking to make a 5th progressive higher July low today (7/8, 7/13, 7/17, 7/22, and possibly 7/24).

Despite the progress being made over the medium-term uptrend, the GBP/USD still faces key resistances preventing the currency pair from a real breakout to the upside. The topside obstacles are the psychological 1.65 level, our 3rd tier downtrend line and Thursday’s highs. As for the downside, should our 2nd tier uptrend line fail the GBP/USD has 7/22 lows and our 1st tier uptrend line serving as cushions.

Like the EU, Britain will be relatively quiet on the economic data front next week. The most prominent release will be CBI realized sales on Tuesday. Therefore, investors will be paying closer attention to U. S. economic data and corporate earnings as the 2nd quarter starts to fill out.

Present Price: 1.6407

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