The GBP/USD pair fell rather hard during the session on Wednesday after initially tried to rally above the 1.68 handle. The Bank of England suggested that perhaps the economy is a lot cloudier than originally thought, and therefore it appears that the British pound may continue to weaken at this point as traders continue to think about the possibility of quantitative easing coming out of England. That being the case, the market could very easily drop from here and head towards the 1.65 handle, which we feel is the next major support region. Down at that area, we would expect see buyers step back into the market for at least a decent bounce.
That being said, the candle is very bearish for the session on Wednesday, and the fact that we are closing towards the bottom of the range of course suggests that the market will continue to sell off as the other side of the equation, the US dollar, is back to buy a central bank that looks like it’s ready to continue tightening its monetary policymaking is more or less a “one-way trade.”
There are plenty of decent economic numbers coming out United States, especially in comparison to the United Kingdom and Europe, so more than likely traders will continue to favor the US dollar in general. With that being the case, we fully anticipate rallies on short-term charts should offer selling opportunities, at least until we get down to the aforementioned 1.65 handle.
The only way that we could start buying this market is if we break above the 1.6850 level, and because of them time it should show a significant reversal of this massive bearish pressure that we’ve seen lately. Regardless, this is a move that looks like it’s ready to continue in the short-term at least, although we are definitely oversold by just about any metric to measure the market by. The marketplace certainly should offer plenty of trading opportunities on the short-term charts, so we believe that the bearish momentum will continue to come in day after day, and rallies will be looked on with suspicion overall.
