As with the EUR/USD, the Cable is showing a slight positive reaction to the much worse than expected U.S. headline Unemployment Rate (10.2%). The Unemployment Rate breached the psychological 10% level we warned about, yet investors are opting to stick with the riskier investment vehicles. However, as we explained in our EUR/USD analysis, the initial counter-intuitive reaction for the Dollar doesn't necessarily tell us how the rest of the session will pan out. Therefore, we are reserving our judgment until we see what investors decide to do with U.S. equities and the Dollar. While we would normally expect investors to ultimately head for safety and unwind their equity purchases in reaction to such negative news, this market has been known to throw quite a few curveballs in the past year. On a positive note, Britain's Input PPI data printed hotter than expected (2.6% vs. 1.6%E). Such inflationary numbers may encourage the BoE to be more conservative in regards to QE in the near-future since we're finally witnessing the inflation the central bank is looking for.

Technically speaking, the Cable is facing what could be the final downtrend line separating the currency pair from more accelerated near-term gains. Our 4th tier downtrend line runs through October highs, meaning these highs could be tested relatively soon if the Cable doesn't buckle under the pressure of our 4th tier. That being said, there still is a possibility that the Cable can reverse into its downtrend. However, the Cable is sitting in a fairly advantageous position considering September highs are drawing near. There isn't much resistance between September highs and August highs, meaning the Cable could potentially have a clear shot at 1.70 should the fundamentals cooperate. As for the downside, the Cable has multiple uptrend lines serving as technical cushions along with 11/5 and 11/3 lows. Additionally, the psychological 1.65 level may now work in the Cable's favor.

Meanwhile, investors should keep an eye on gold this afternoon. The precious metal tested its psychological $1100/oz level a few moments ago. Further strength in gold could help buoy the Cable and possibly yield a positive performance since the two investment vehicles are normally positively correlated. Regardless, we believe volatility could increase as the week comes to a close, so investors should keep an eye on current techincals.

Present Price: 1.6585

Resistances: 1.6606, 1.6630, 1.6662, 1.6688, 1.6714, 1.6736, 1.6783

Supports: 1.6564,1.6529, 1.6495, 1.6467, 1.6426, 1.6396

Psychological: 1.65, October and September highs