The Cable is dipping after breaking through our previous 3rd and 4th tier downtrend lines and the psychological 1.65 level. We mentioned before how a failure of both our 3rd and 4th tiers signals a probable retest of September highs and possibly the highly psychological 1.70 level. The Pound continues to find strength in the BoE's decision to stray from its overtly dovish monetary policy in light of recent optimistic econ data. After all, King's previous hawkish sentiment was a leading factor driving the GBP/USD towards its October lows. Therefore, it's reasonable to expect the Cable to flourish in a more neutral policy environment coupled with improving fundamentals. However, the BoE has yet to make a concrete action, and the central bank will likely need further fundamental confirmation showing that Britain's economy warrants a tighter monetary policy before considering physically tightening the reigns.

Speaking of fundamentals, Britain's Retail Sales data printed 0% growth for the second time in a row, indicating the improvement in unemployment hasn't yielded higher consumption. Moving East, China reported econ data that was altogether in line with analyst expectations. China's inability to beat estimates has dented investor optimism a bit, though there shouldn't be much of a hangover. More importantly, bankers and analysts are expressing their concern about excess liquidity again, and its possible China will need to tighten in 2010. However, it's still 2009, and this type of speculation shouldn't impact global markets too much unless government officials officially announce China's express intent to take action.

Meanwhile, all eyes are on Q3 earnings and tomorrow's wave of econ data. U.S. earnings continue to top estimates, and this may drown out building psychological headwinds from the ECB and China. Britain will release its Prelim GDP and BBA Mortgage Approvals data tomorrow. Investors expect Prelim GDP to turn positive along with a steady improvement in Mortgage Approvals. Additionally, the EU's PMI data should carry some weight since the last PMI wave signaled a cool down in Germany.

Technically speaking, the Cable's in good shape and a test of September highs in the near-term seems probable. The EUR/USD briefly ventured beyond 1.50 and the AUD/USD continues to climb higher. The big development to watch is the S&P's 1100 approach. Should the S&P futures break beyond 1100, we can expect a corresponding rally in the risk trade. We've created a makeshift 4th tier downtrend line for the Cable to serve as a topside barrier along with 9/15 and 9/11 highs. As for the downside, the Cable's impressive ascent has created quite a few technical cushions, including our 4th tier uptrend line along with the psychological 1.65 level and intraday lows.

Present Price: 1.6561

Resistances: 1.6564, 1.6594, 1.6630, 1.6658, 1.6686, 1.6718

Supports: 1.6538. 1.6515, 1.6489, 1.6459, 1.6427, 1.6399

Psychological: 1.65