The Cable is selling off sharply on Monday in reaction to a terrible earnings report from HSBC.  Additionally, the major London bank will need to raise cash to stay afloat, showing a second wave of contraction is washing through the global financial industry.  Since Britain’s GDP is highly reliant on the financial sector, the Cable is getting knocked with the currency pair heading back towards the psychological 1.40 level. 

The relative weakness of the Pound is reflected in the EUR/GBP as the Euro looks to break out against the Pound again. Therefore, it seems it is the Cable’s turn to make a large leg down.  We must not forget both the EUR/USD and GBP/USD are positively correlated to U.S. equities and the S&P futures are crashing below their 2008 lows. 

Therefore, we find little reason to be positive on the Cable trend wise.  Although Britain’s Manufacturing PMI came in line today, Net Spending and Mortgage Approvals continue their decline, showing consumer confidence is deteriorating.  Fundamentally, we find resistances of 1.4078, 1.4119, 1.4173, and 1.4219. 

To the downside, we see supports of 1.4023, 1.3964, 1.3905, and 1.3841.  The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside.  The GBP/USD is currently exchanging at 1.4060.

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