GBP/USD Heads Below 1.60 After Failing To Cross 9/30 Highs

The Cable is moving lower today at a brisk pace after failing to eclipse 9/30 highs and our 4^th tier downtrend line.  The Cable has proceeded to pullback towards 10/7 lows as the FX markets experience a broad-based appreciation of the Dollar.  The GBP/USD’s inability to climb past the aforementioned topside technical barriers leaves the door open for the currency pair to revert back to its near and medium-term downtrends.  That being said, it will be important for the Cable to remain above 10/7 lows and our 1^st tier uptrend line since bulls don’t want to break the streak of consecutive higher lows.  Such a development could spell the beginning of a more protracted near-term selloff.  Overall, the Cable has neglected to full participate in the breakout in gold and the AUD/USD and the battle between the bulls and bears lives to see another day.  Therefore, investors should eye the aforementioned topside and downside technical levels over the next few trading sessions.

Volatility should pick up next week since Q3 earnings season will shift up a gear and Britain will start releasing some key economic indicators.  It’s a bit disconcerting the Cable isn’t being buoyed by better than expected PPI Input data today.  Rising prices should discourage the central bank from committing to future dovish monetary shocks.  Perhaps investors prefer to wait for Tuesday’s CPI data and the tentative release of Britain’s Inflation Letter.  If higher input prices translate to climbing consumer prices then this could help buoy the Pound.  However, higher input prices and sluggish consumer prices would lead investors to believe that corporate profits are being pinched, implying the BoE would need to keep liquidity flowing to encourage lending.  We maintain our negative outlook trend-wise on the Cable until our topside technicals are eclipsed and we see a broad, positive fundamental change in British econ data.  Furthermore, any uptrend in the Cable will continue to be hampered so long as the BoE holds its comparatively dovish monetary stance.

Present Price: 1.5941

Resistances: 1.5964, 1.5992, 1.6024, 1.6045, 1.6072, 1.6095, 1.6127

Supports: 1.5921. 1.5900, 1.5862, 1.5840, 1.5809, 1.5791, 1.5766

Psychological: 1.60

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