The Cable has pulled back from yesterday's highs after Britan's Trade Balance came in much weaker than expected (-7.2 bill. Vs -6.1 bill forecast). The Trade Balance number is a bit disappointing since it works against the recovery we've witnessed since January lows. Furthermore, the rising trade deficit is concerning considering the recent improvement in Britain's manufacturing production data. Therefore, this implies that the cause for the rising trade deficit may be more of a symptom of rising imports rather than declining exports. Either way, the combination of disappointing Trade Balance data along with broad-based strength in the Dollar has been enough to knock the Cable back below our 4th tier downtrend line. On the other hand, the Cable has avoided a retest of 1.65, and the technicals appear to be working in favor of a near-term uptrend. As a result, investors shouldn't become too discouraged by today's pullback.

Meanwhile, the EUR/USD is battling 1.50 while the S&P futures and gold battle their respective 1100 levels. Furthermore, the USD/JPY continues to hover around its psychological 90 area. Therefore, consolidation is the risk trade appears to be a sign of healthy hesitation in the wake of large gains and the face of important psychologicals. Although the news wire should be pretty quiet in the U.S. today, activity in the FX markets could pick-up later when China releases a wave of economic data late Tuesday EST. China will release Industrial Production, CPI, CPI, and Fixed Asset Investments. Investors will likely be paying particularly close attention to China's econ data since the nation's economy has been an engine in the global recovery. An outperformance in China's data could give the risk trades a nice boost, whereas a cool down could result in further Dollar strength. Britain will also keep its news flowing with the release of CCC data tomorrow morning along with the BoE inflation report. BoE Governor King will address the general public as well and investors will be looking for hints of the BoE's present monetary stance.

Technically speaking, the Cable faces topside technicals in the form of our 4th tier downtrend line, 11/09 highs, and the psychological 1.70 level. As for the downside, the GBP/USD still has several uptrend lines serving as technical cushions along with 11/06 lows and the psychological 1.65 level.

Present Price: 1.6704

Resistances: 1.6714, 1.6730, 1.6761, 1.6797, 1.6812, 1.6838

Supports: 1.6688, 1.6662, 1.6615, 1.6598, 1.6574, 1.6530

Psychological: 1.70, 1.65, August Highs