The Cable has leapt past our 3rd tier downtrend line, and is trading just above the psychological 1.65 level as we witness a broad-based selloff of the Dollar. We recognize similar, aggressive movements in both the EUR/USD and USD/JPY confirming investor distaste for the Greenback. As we explained in today's EUR/USD commentary, today's volatility in the FX market is mostly based on concern that America's massive injection of liquidity will ultimately result in a large depreciation of the Dollar as investors hedge against potential hyperinflation. We believe the concern is a result of talks at the G20 summit. Meanwhile, it's widely known that gold has hit the highly psychological $1000/oz mark again. The recent gold rush is likely a result of the same fear surrounding future inflation. The multiple inflection points of our trend lines in both the GBP/USD and EUR/USD turned out to be a reliable sign for future volatility. Investors are sending a resounding technical message regarding their preference for the uptrend following a season of summer doldrums. Meanwhile, volatility should remain high as the week progresses considering we will receive a wealth of economic data from Britain, China, and the U.S. along with a monetary policy decision from the BOE on Thursday.

Despite today's positive showing in Britain's Manufacturing Production number, the GBP/USD's gains may be capped from here on out as investors eagerly await Thursday's BOE monetary policy decision. The BOE has been proactive regarding its alternative liquidity package as policy makers try to stymie the immediate threat of deflation. The BOE could remain in an aggressive monetary stance as they try to limit the Pound's appreciation by injecting more liquidity so as not to derail the economic recovery taking root. Either way, volatility may not peak until we receive Thursday's wave of news and data.The BOE's recent injection of liquidity has surely impacted the GBP/USD. While the EUR/USD has broken through August highs, the Cable's August highs remain well out of reach. Therefore, the GBP/USD has a more complicated path ahead if the currency pair opts to head higher over the near-term as we anticipate. The first technical obstacles to the topside will be the psychological 1.65 level and the lid of the 8/13-8/21 trading range. The GBP/USD should experience more exciting topside movements beyond these barriers. As for the downside, the Cable has intraday lows and our 3rd tier downtrend line to fall back on.Present Price: 1.6520

Resistances: 1.6552, 1.6570, 1.6593, 1.6611, 1.6635

Supports: 1.6520, 1.6498, 1.6478, 1.6460, 1.6442, 1.6417

Psychological: 1.65