GBP/USD Daily Outlook - Feb. 7

Christopher Lewis

By: Christopher Lewis

The GBP/USD pair has been extremely robust over the last several weeks as the Dollar has been sold off in reaction to not only the Federal Reserve promising ultra low interest rates until the end of the 2014 calendar year, but also because many traders are starting to suggest that perhaps we will see the third version of quantitative easing soon.

The cable pair tends to move with the “risk on” or “risk off” attitude of the markets. The stock markets have been strong recently, and the selloffs have been fairly shallow, much like this chart. The move has been parabolic, so a pullback would be expected as the markets cannot move in one direction forever, but someone forgot to tell the cable bulls this it seems.

With this very bullish move, a lot of traders will try to get in on the move, and this continues the upward pressure. However, there has to be a point in which this pair breaks back down again. With this in mind, I am looking at the pair as a buy – but not here.

Support Levels

The pair looks to be supported at several different levels, and barring a meltdown in Europe this pair looks like it wants to fight. The real driver is probably some better than expected economic numbers coming out of England, while the Fed has pretty much promised to keep on killing the Dollar for another couple of years.

The 1.58 level has held as support, and as it was once resistance – this makes technical sense. The 1.59 level above seems like it is going to be resistive, so I am hoping for some kind of pullback before I get involved. The 1.57 level looks like a support level, and the bottom of the hammer at 1.56 also foretells possible support. It is at that level that I would actually be willing to sell, as it would show real strength by the bears.

Overall, I expect this pair to bang around between the 1.56 and 1.60 levels for a while, and will play it as such. With those levels in mind, we are too high in the range at the moment to buy, but I am willing to get involved if we pullback to one of those levels mentioned above, and shows some kind of supportive action.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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