By: Christopher Lewis
The GBP/USD pair has been frustrating bears for several sessions now as it simply refuses to fall. The pair was dangerously close to triggering a sell signal at the 1.53 level for a massive head and shoulders pattern recently, and as it didn’t manage to close below that level on a daily chart, it narrowly escaped a massive move down. However, the pair isn’t all that exciting to me at the moment.
The cable is a risk-sensitive pair, and there are plenty of risks out there at the moment. Granted, the European Union doesn’t seem to be exploding, but there is always headline risk as the talks continue. The bond yields have come down recently, but are still ridiculously high in many countries, and to be honest – nothing has actually been solved.
The UK is tied to the hip with Europe, and the banks are in deep if the whole thing falls apart. The UK banks own a lot of sovereign debt in the EU, and this of course is a massive worry. Also, the UK economy isn’t necessarily the strongest at the moment. Meanwhile, the US is plodding along in a decent growth pattern. (Decent being a relative term.) Because of this, the Dollar is still a bit stronger in my mind. Also, the bearish pressure has been around for a while, and this recent bounce hasn’t changed anything long-term for me yet.
Trouble up ahead.
The pair has simply gone parabolic at this point. The 1.57 to 1.58 level above has been massive resistance recently, and I find it hard to believe that this parabolic move is going to suddenly rip right through it. At the very least, we are looking at a pullback, and to be honest – the trend is still down.
A lot of this will come down to Europe, but the fact is that the US is stronger than the UK presently, and this should reenter the picture as well. The yellow box is an area that I am looking for a shooting star, engulfing bearish candle, or other such sell signal. AS a side note, the 100 day EMA is also sitting just above. I am not interested in buying until this pair finds a way to close above the 1.58 level on the daily chart.
