The GBP/USD catapulted after rising above our 2nd tier uptrend line, surging well beyond the psychological 1.45 barrier.  In fact, the Cable peaked past our 3rd tier trend line before retreating as investors take profits before challenging March highs.  Britain continues to receive good economic data including yesterdays Manufacturing PMI and today’s Construction PMI and Nationwide HPI numbers. 

In other words, the manufacturing and construction industries are looking up in Britain while home prices are actually on the rise.  Therefore, the quantitative easing is having its desired impact on credit markets as lower interest rates lure home buyers, soaking up some of the excess supply.  As a result, the Cable is making an obvious statement in its inclination to follow the uptrend, leaving our downtrend line in its dust.  The rally taking place in U.S. equities is only fueling the fire considering the tight correlation between the GBP/USD and S&P futures. 

Investors expect a recovery in Europe to follow stabilization in the U.S.  Hence, the positive housing and manufacturing data surfacing from America is encouraging for those long the Cable.  If the GBP/USD can climb past March highs, we anticipate more large gains to the upside as the currency pair heads towards 2009 highs.  That being said, our 3rd tier trend line should be a challenge, and bears will not let March highs go easily.  Therefore, expect a battle in the near-term. 

Fundamentally, we find resistance of 1.4644 with additional resistances hanging at 1.4683, 1.4728, 1.4774 and 1.4820.  The 1.50 level serves as a key psychological barrier while the 1.45 area becomes a psychological cushion. To the downside, we see supports of 1.4601, 1.4573, 1.4541, 1.4506 and 1.4474.   The GBP/USD is currently exchanging at 1.4646.

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