GBP/USD fell below the 1.53 level on Thursday, but didn’t manage to stay under it. The area is serious support, and a breaking below the support zone would have massive implications in the pair going forward. If it gives way, the massive head and shoulders on the weekly charts would be broken and the neckline will have given way. The trend is down, and the highs are getting lower. The area simply has to be cleared in order to sell at this point though.
The candle for the session ended up being a supportive hammer, and as a result we think that this pair might just bounce. If it does, we will not be long of it, as we will look for shorting opportunities above in order to profit from an inevitable fall. The pair is extraordinarily weak, and one day’s action doesn’t change that.
Because of this, we are willing to sell the daily close below 1.53 on Monday if we get it on Friday, but want to see the close below the bottom of the above mentioned hammer as well as it shows a continuation of the downward pressure. If we don’t get it, we will look to sell at higher levels, perhaps the 1.55 level that has produced reactions in the past as the massive selloff on Wednesday seemed to be predicated upon that level seeing a lot of sellers.
The pair is to be sold and not bought, no matter how nice the potential bounce looks. The fact remains that the Dollar is being bid up in times of uncertainty, and uncertainty is all we are getting on a consistent basis. With this in mind, we are selling rallies s they come, and they will.
The pair is extremely sensitive to risk appetite, and the UK is going into serious austerity measures presently as well. With this included, we see anemic growth in the United Kingdom going forward, and the United States seems to be one of the healthier economies in the West at the moment. Because of this, we feel the move towards the US dollar will continue, and we are waiting for an opportunity to continue with that pattern. If and when we get that breakdown – the head and shoulders measures down to roughly 1.40 as a final target.
Written by FX Empire