The Cable is trying to recover to our 2nd tier uptrend line after yesterday's pullback resulting from a substantial selloff in U. S. equities. The Cable is finding little salvation in last night's better than expected Consumer Confidence number since both British Manufacturing Production and today's Halifax HPI come in negative.

While we expected the pullback in Manufacturing Production since the PMI was negative last week, the disappointing HPI data deflates the confidence surrounding a potential recovery in the British housing market.

These two negative data points, combined with last week's discouraging GDP and Current Account numbers, are weakening the Pound further. Meanwhile, the S&P futures are experiencing substantial downward pressure, and crude continues to log large losses. Hence, investor confidence still seems to be turning sour in regards to the longevity of a global economic recovery.

We've seen volume increase to the downside in both the GBP/USD and the EUR/USD, though total volume remains at a relatively subdued level. Therefore, investors should take notice if volume increases to the downside from Tuesday's session, for this could indicate a sharper selloff approaching.

Though the Cable remains above 1.60, it is struggling to stay above our 1st tier downtrend line while hoping to reach our 2nd tier uptrend line. Should the Cable's immediate-term pullback should pick up pace, the currency pair could find noteworthy support in the psychological 1.60 level. If not, then the GBP/USD still has our 1st tier uptrend line and June lows as a safety net.

Investor and analyst focus will be on tomorrow's BoE meeting and 2nd quarter earnings releases. Rumors have been floating around that the BoE may increases its present quantitative easing plan by 25 billion. Even though these rumors are unsubstantiated, they make for an interesting BoE press conference. Investors will be paying particularly close attention to the BoE's plans regarding quantitative easing.

However, should the BoE increase its level of QE, we wouldn't be surprised to see a small, near-term pop in the Cable since this is what occurred following the initiation of the plan. We noticed a similar positive reaction from the EUR/USD after it announced its alternative liquidity measures as well. As far as earnings go, investors are very curious as to how 3rd and 4th quarter projections will fare. Naturally, corporate earnings should have a large impact on U. S. equities. If the S&P futures should falter, the Cable would likely tumble with them due to their strong positive correlation.

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