The Cable is giving into our 3rd tier downtrend line after last week's push was blocked by our trend line and the psychological 1.65 level on declining volume.  Despite the GBP/USD's willingness to head higher, the currency pair is giving into its positive correlation with gold and U.S. equities.  Market sentiment is turning sour due to a combination of international tension (Iran/N.Korea) and the World Bank reducing its outlook for global economic growth from -1.7% to -2.9%.

The possibility remains that present market stability is not a true bottom since we have not seen a complete recovery in economic data globally.  The Cable is also dealing with a struggling Euro as the EU currency depreciates strongly across the board.  Meanwhile, the Pound maintains its relative strength due to the fact that Britain's economic data has been the most encouraging globally next to China's. 

The Cable continues to be resilient after last week's CCC number reiterated the encouraging improvement taking place in Britain's employment market.  Regardless, U.S. equities are treading water and the Cable's positive correlation with the S&P should shine through at the end of the day.

Speaking of the S&P, the indicie's futures are doing what they can to avoid a retest of the highly psychological 900 level.  Any significant pullback in the S&P futures would likely result in a corresponding downturn in the Cable.

In other correlation developments, gold has made an aggressive move to the downside after a period of tight consolidation.  Gold has had a negative correlation with the Dollar, implying the greenback could experience a swift appreciation soon.  The Cable's inability to tackle previous June highs and the psychological 1.65 level is certainly discouraging.  We've noticed some interesting volume to the downside while volume tailed off during important moments of resistance.

Hence, we believe near-term momentum remains to the downside in the GBP/USD.  Fortunately for the bulls, the currency pair has constructed some nice supports along the way due to the Pound's comparative strength globally.

Therefore, should the Cable head south, the currency pair has close defenses at our 3rd tier uptrend line and June 18 lows.  As for the upside, the key for the GBP/USD will be clearing our 3rd tier downtrend line and previous June highs on rising volume.   Should this happen, we could witness a nice near-term run. 

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