The Cable’s decline carried on Monday before finding comfort in the 1.65 area as anticipated. Both the housing price and retail sales data points came in better than anticipated late Monday, helping the Cable find a bottom. Investors are ignoring the slight pullback in Britain’s Trade Balance this morning and the Cable is balancing on our 1st tier uptrend line.

Meanwhile, the S&P futures are experiencing a sizable pullback. Though the reversal in correlation between the Cable and the S&P futures continues today, it remains to be seen whether this behavior will be temporary or long-lasting. After all, the recent appreciation of the Dollar could have just been an indicator for today’s pullback in U. S. equities. Therefore, we’ll need to monitor the correlation behavior for a few more sessions before drawing any conclusions. The reaction of the Dollar and equities to tomorrow’s monetary policy decision by the Fed could paint a clearer picture.

In addition to the Federal Reserve’s monetary policy decision, Britain will also release its CCC number, the Average Earnings Index, and the BOE will print its Inflation Report. Therefore, Wednesday’s session should be volatile for the Cable. Should Britain’s CCC number come in lower than expected while the BOE’s Inflation Report shows modest inflationary pressure, this could give the Pound relative strength and boost the GBP/USD. Declining unemployment and rising inflation indicates further improvement in Britain’s economy, giving the BOE room to rope in some of its liquidity in the foreseeable future.

Despite today’s consolidation in the GBP/USD, present momentum remains to the downside due to Friday’s pullback on considerable volume. However, the 1.65 area should continue to be a reliable defense since the currency pair has battled with this psychological zone in the past. The GBP/USD also has our 1st tier uptrend line and intraday lows acting as immediate-term technical cushions. As for the upside, the GBP/USD has an uphill battle. The Cable must deal with our 2nd tier uptrend line and the lid of its 7/20-7/28 trading range.

Present Price: 1.6490

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