The GBP/USD pair rose slightly during the session on Tuesday while the markets in general were quiet. The pair is approaching the 1.55 handle, and that was the scene of the latest break of support in this pair. Because of this, one has to be aware of whether or not the area holds as resistance.
Below the 1.55 level, there is support all the way down to 1.53, although it has been bending quite a bit lately. The breaking of the 1.53 level is a massive sell signal for us, as the weekly chart would then confirm a head and shoulders being triggered in the market. The measured move is expected to see as low as 1.40 if this signal does trigger.
As far as selling here, it would be somewhat difficult. However, if does look like the market in general is grinding lower, and if you are patient – you could possibly get rewarded as we break lower. The highs are getting lower, and the lows have recent dug a little deeper into the support area. Again though, the pair is still just a “sell only” pair to us, but we prefer to see the 1.53 level broken on a daily close to get short, or at least a rally to sell if it fails.
In a sense, the Tuesday candle shows a bit of a failure and shorter term traders can perhaps use a 4 hour or even a 1 hour candle for a signal to sell, and the pressure would be with you – even if you are selling into an area that has fought hard. It really does seem like a matter of time really, but being patient will more than pay for itself if you are willing.
The fundamentals are not helping either. The Dollar is king at the moment, and with all of the headline risks coming from Europe, there is a good chance that the Dollar will continue to rise in value overall. The selling of the Dollar would be very difficult against most currencies, but the Pound is especially hard because not only of the chart, but the fact that the United Kingdom is so intertwined with the European Union economically is perhaps just as important – if not more so.
We are selling this pair on rallies, and will sell hand over fist on a daily close below 1.53.
Written by FX Empire