The rally in the Cable is pulling back after Friday’s insufficient volume failed to push the GBP/USD above the highly psychological 1.50 mark and April highs, the two barriers to a lasting uptrend.  If volume wanes, we wouldn’t be surprised to see more profit-taking in the currency pair.  The Cable has ducked back below our 3rd tier uptrend line while our 2nd tier uptrend and downtrend lines reach an inflection point.  There is plenty of room between present price and our 2nd tier uptrend line, meaning the GBP/USD could have overextended itself. 

Therefore, if our present 1.4826 support doesn’t hold, it looks like the next stop for the Cable could be our 1.4730 level.  Despite near-term downward pressure, momentum remains to the upside since we saw some encouraging data again from Britain last week.  Furthermore, the GBP/USD remains positive correlated with the S&P futures, which made some impressive strides of their own last week.

While volume could be light today, action should pick up as we approach Thursday’s ECB press conference and the release of the highly anticipated stress test results.  Britain has a banking holiday today, meaning we won’t see any data until tomorrow’s Halifax HPI, Construction PMI, and Nationwide Consumer Confidence.  The Halifax HPI comes a day after America’s Pending Homes Sales release, so we will get a better picture of the housing industry in both economies.  If the data points come in better expected then we could see a nice boost to the upside in the GBP/USD.              

Fundamentally, we find resistances of 1.4880, 1.4905, 1.4951, 1.5009, and 1.5059.  To the downside, we see supports of 1.4826, 1.4773, 1.4730, 1.4677, and 1.4626.  1.45 serves as a psychological cushion with 1.50 acting as a key psychological barrier. The GBP/USD is currently exchanging at 1.4856.

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