The Cable has popped nicely from Monday lows and is trading back above the psychological 1.65 level. Both Britain's CPI and RPI indexes came in 3 basis points ahead of analyst expectations, contradicting fear over deflation caused by the BOE's recent injection of liquidity to its QE package. The Pound is experiencing considerable relative strength today in reaction to the data since investors punished Britain's currency in reaction to the BOE's actions. The improvement in pricing gives investors hope that the BOE may cap its QE package from here on out. Furthermore, the liquidity will only improve inflation, putting the BOE in a position to tighten liquidity sooner rather than later should the global economy continue to recover.

Despite today's recovery in the GBP/USD, the currency pair still faces challenging near-term obstacles to the upside. The Cable must deal with the lid of its 7/20-7/28 trading range, our 3rd tier downtrend line as well as 8/13 highs. Additionally, the S&P futures are experiencing sizable downward pressure due to today's weak pricing and housing numbers along with last week's disappointing consumption data. Hence, the GBP/USD's barriers may prove challenging should the S&P futures not turn around due to their positive correlation. On the plus side, the Cable is back above our 1.65 and our 2nd tier uptrend line, meaning the Pound should prove resilient if U.S. equities continue their slide. Tomorrow Britain will release CBI Industrial Order Expectations along with the MPC's Meeting Minutes. Should these data points impress investors, the GBP/USD could continue to experience some immediate-term upward mobility.

Present Price: 1.6533

Resistances: 1.6537, 1.6562, 1.6593, 1.6611, 1.6633

Supports: 1.6505, 1.6482, 1.6455, 1.6428, 1.6398

Psychological: 1.65

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