The Cable has returned earlier gains stemming from positive data from China along with a much better than expected Claimant Count Change number. The GBP/USD's u-turn comes in reaction to BoE Governor King implying that future liquidity measures are not out of the question, thereby leaving the window open for more injections into the central bank's ballooning QE package. King is playing psychological games with the markets as we've seen throughout the year. Governor King is likely trying to deflate the Pound in concern that Sterling may be appreciating against the Dollar too quickly right now. On a positive note for Dollar bears, King's statement could imply that he is expecting more positive data from Britain and/or another wave of broad-based Dollar weakness, and is bracing the Cable for approaching upward forces.
Meanwhile, gold is continuing its charge above $1100/oz and the S&P futures are trading right at their own psychological 1100 level. Gold has led the Dollar in the past, supporting speculation that the Greenback could be in for another round of weakness due to their negative correlation. Furthermore, any substantial topside breakout in the S&P above 1100 could result in a broad-based return to risk, thereby hitting the Dollar and buoying the Pound. However, if this were to happen, it's uncertain how much and for how long Governor King's statements would hold the GBP/USD at bay.
Technically speaking, the Cable still has our 1st and 2nd tier serving as technical cushions along with 11/06 and 11/05 lows. Furthermore, the psychological 1.65 could now work in favor of the GBP/USD. However, any immediate term weakness in equities and broad-based strength in the Dollar could result in heightened downside movements since the Cable is already being held down by King's policy comments. As for the topside, The GBP/USD is facing multiple downtrend lines along with intraday and 11/09 highs. Therefore, today's pullback has created a couple formidable, immediate-term topside barriers.
Present Price: 1.6658
Resistances: 1.6662, 1.6688, 1.6714, 1.6730, 1.6761, 1.6797
Supports: 1.6615, 1.6598, 1.6574, 1.6545, 1.6530, 1.6512
Psychological: 1.65, 1.70, August Highs