The GBP/USD is knocking on the door of our 3rd tier downtrend line once again as it reaches an inflection point with our 3rd tier downtrend line.  While the Cable is in the position to make a technical breakout today, the behavior of the GBP/USD's correlations aren't supportive of such a movement.

Therefore, we wouldn't be surprised to see the currency pair duck back towards our 2nd tier uptrend line as investors await Britain's release of its nationwide home price index and current account data points tomorrow.  Regardless, the GBP/USD is in the midst of several inflection points with key economic data and central bank announcements pouring in later this week.

Hence, the ingredients are on the table for both the Cable and EUR/USD to break from their trading ranges.  While the Cable is gaining some upward momentum and seems more poised to break up than down, the table can quickly turn as we've seen in the past.  Since the Dollar has been moving under more of a psychological than fundamental influence over the past couple weeks, we believe incoming data and earnings reports could be the force the GBP/USD needs to dislodge from its tight range.

Volatility has increased slightly over the past few sessions with volume declining.  The declining volume certainly isn't helpful for a currency pair trying to make technical gains, which further supports our anticipation of an immediate-term retracement towards our 2nd tier uptrend line.

We've yet to see the S&P make a concrete near-term directional decision with crude floating around $70/bbl.  While we believe a breakout to the upside is more likely than a large pullback in the Cable, anything is possible in this market.         

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.   

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.