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GBP/USD Commentary and Analysis

|Includes: CurrencyShares Australian Dollar Trust ETF (FXA), FXB, FXC, FXE, FXF, FXY, UDN

The pound is showing some signs of fatigue and is currently trading at 1.6365.  Past breaks to the 1.63 handle has found support, and a return to the 1.65 level.  This pair has been trading in the mid 1.60's since early June, so it will take some serious economic events to dislodge the pound from this range. This morning the Case-Shiller Index showed that US housing prices were up 3% from the 1st quarter and only down 15% from the 2nd quarter a year ago.  Experts had been touting the recovery of the British economy, but recently there have been some doubts about the longevity of the British comeback.

This chart looks like it wants to roll over and head lower.  The pressure on the pound, however, may not be coming from the USD, but rather from weakness in the pound versus the euro.  As we pointed out yesterday, the EUR/GBP appeared to be breaking above the bottom action in that pair since early June. Unless we get something to dispel the perception that the Brit's recovery is lagging behind that in Europe, this trend will continue.  Our preference is long the euro rather than the dollar, and short the