The Cable is crashing Monday on the news Britain is nationalizing Lloyd’s Bank.  Additionally, it seems HSBC has considerable exposure in U.S. loans, hinting it will need further assistance from the British government.

 Hence, the Britain government is committing itself fully to unknown levels of toxic debt, meaning the BOE may have to print many more Pounds to account for the losses.  This news has sent the GBP/USD tumbling below our 1st tier uptrend line and well below the psychological 1.40 level.

The Cable is on the path to retest 2009 lows in a hurry.  Should the currency pair reach 2009 lows intraday, we expect considerable support and a rally from these levels.  However, the development is confirming our negative trend outlook on the Cable.

The next important development will be whether the Cable can hold 2009 lows in the near-term.  If the lows don’t hold, then we could witness the continuation of incredible near-term selling pressure.   Fundamentally, we find resistances of 1.3777, 1.3805, 1.3844, and 1.3877.  To the downside, we see supports of 1.3726, 1.3683, 1.3621, and 1.3585.

The 1.40 level becomes a psychological barrier to the upside with 1.35 serving as a cushion to the downside.  The GBP/USD is currently exchanging at 1.3764.

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