The GBP/USD pair tried to rally during the course of the day on Wednesday, but as you can see struggled to go to much higher than we started. The 1.66 level continues to offer resistance, and as a result we have formed three shooting stars in a row. This is in fact a very negative sign, and as a result we feel that it’s only a matter of time before we break down from here. The 1.65 level is support, and if we get below there we figure that this market will continue to go down to the 1.63 level, and then the 1.60 handle. At the 1.60 handle, we recognize it as much more supportive than some of the other levels, so the market will almost undoubtedly bounce from there.
We think that the market is going to be one that you can continue to sell on short-term charts every time we rally, and of course show signs of resistance. With that, we feel that the market should continue to offer little bits and pieces of profit here and there if you get the opportunity to follow the short-term charts, as the markets will probably be fairly quiet for the last week of the holiday season.
On the other hand, if we break above the 1.66 level, we could see a significant move higher as it would show a break of pretty significant resistance over the last three or four sessions. Above there, we would more than likely head to the 1.68 handle, which is much more resistive in our opinion. That level will more than likely bring in more sellers, but if it does get broken to the upside we really don’t see any reason why we won’t head to the 1.70 level.
Ultimately, we feel that we are going to have to play “small ball” for bit here, but hopefully by the end of the first week of September, we should get a little bit more clarity. At this moment though, we feel that the downside is probably more likely.
