The Cable is perking up this morning as the S&P futures fight to break loose of their psychological 1100 level. The GBP/USD has benefitted from a relatively quiet data wire from Britain since the CCC number beat expectations. However, the news flow will pick up tomorrow with the release of both CPI and RPI data points. Furthermore, the BoE will release its anticipated Inflation Letter. Since the BoE's target inflation rate is 2%, any disappointing numbers concerning inflation could spark investor speculation that the BoE will inject more liquidity into its QE fund. After all, Governor King recently left the door open to future alternative liquidity measures if deemed necessary. Meanwhile, an inflation reading topping analyst expectations could boost the Cable beyond previous November highs and would support why the BoE opted to inject 25 billion Pounds at its last meeting instead of the anticipated 50 billion.

The U.S. will release pricing data of its own tomorrow along with TIC Long-Term Purchases, Capacity Utilization Rate, and Industrial Production. As we saw today, the U.S. data flow continues to print negatively mixed. Regardless, investors are snapping up equities and looking to send the S&P futures to fresh 2009 highs. If the S&P futures should experience a topside breakout, the Cable may follow suit since the two investment vehicles are normally positively correlated.

Technically speaking, the Cable faces thin topside obstacles in the form of our 3rd and 4th tier downtrend lines along with previous November highs. Since our 4th tier downtrend line runs through these November highs, a pop past our 4th tier on sufficient volume could indicate a more extensive near-term breakout towards August highs and the highly psychological 1.70 level due to a relative lack of historical resistance. As for the downside, the GBP/USD has our 1st and 2nd tier uptrend lines serving as technical cushions along with 11/12 and 11/05 lows. Furthermore, the psychological 1.65 level could work in the Cable's favor should it be tested.

Present Price: 1.6741

Resistances: 1.6761, 1.6790, 1.6808, 1.6828, 1.6849, 1.6875

Supports: 1.6730, 1.6694, 1.6666, 1.6643, 1.6615, 1.6598

Psychological: 1.65, 1.70, November and August Highs, November Lows