GBP/USD fell overall during the session on Wednesday as the pair reached the upper end of the recent consolidation range. The 1.57 level just above the current price has been the start of a resistance zone up to 1.58, and as a result we aren’t keen to buy this pair until the 1.58 level can be closed above on the daily chart. The pair has seen a lot of pressure to the downside, and the most recent low was lower than the one before it.
The UK is currently going through austerity, and the economy is expected to be somewhat stifled because of it. However, the results aren’t nearly as worrying as the fact that the UK sends 30% of its exports to the European Union, a place that is almost doomed to recession at this point. With the biggest customer not buying your goods, this can certainly put a dent in your growth. The UK is more than likely going to be one of many victims of the European mess.
The pair formed a hammer-ish candle for the session, but at the top of the range, which means that it will have a hard time picking up steam to break about to the upside. The Non-Farm Payroll report that comes out on Friday will more than likely make for no real sudden or strong moves overall, and as a result it is hard to think of a scenario that this pair suddenly breaks the consolidation range it is currently in. With that being said, there is always the possibility of something coming out of Europe, but on the whole – the next couple of days should be fairly calm.
The bottom of the range starts at the 1.55 level, and extends down to the 1.53 level which is a massive spot for this pair. The breaking below of that level would trigger a massive head and shoulders pattern on the weekly chart and should see the pair going down to 1.40 before it is all said and done. At this moment in time, we are more likely to sell than buy if we see weak candles on shorter time frames. We are not looking for big moves, rather just quick 50 -100 pips gains on sell orders.
Written by FX Empire