GBP/USD- Party Is Over For Now, Let's Take a Break

By: Andrei Tratseuski

Prompted by austerity measures as well as hawkish comments by some members of Bank of England, the British Pound had enough force to reach our targets from yesterday's article: GBP/USD- The Trend Remains Intact. Initially, we stalled exactly at 61.8%, later in the London Session breaking to the highs of the day, also commented upon in the article. However, today's picture change at the open of New York Session and after risk aversion is taken hold due to worse than expected picture in Europe and Canada, the Pound slipped from the highs. Through out the New York Session, we expect the Pound to continue to head lower as long as New Home Sales and Federal Reserve do not ruin the parade.

The Pound is entrenched within a tight uptrend, however, now we are awaiting upon a movement to the downside of that channel. A break of 1.4950 will initiate a rally to the upside. However, at the current point of time we are looking for a movement to the downside, a bottom of the channel will lay around 1.4750, yet depending on the reaction of the markets to the later releases coming from US, this will guide the currency pair. Be weary of 38.2% retracement of today's high and yesterday's low at 1.4850, if US data surprises to the upside. A push to the 61.8% retracemen of the same levels may originate if Home Sales disappoint, where after the currency pair may push to the bottom of the channel.