GBP/USD Daily Outlook March 20, 2012

By: Christopher Lewis

The cable pair has been very positive lately as the Pound has enjoyed a bit of resurgence. The pair has been stuck in a range over the last 2 months however, and this leads me to believe that we are simply trying to figure out where to go at the moment, but I see no real catalysts at the moment to break us out of this range.

The Pound itself is probably going to suffer at the hands of an imploding Europe. True, the Greeks got a bit of a reprieve via the bailout recently, but the long-term issues still remain, and Greece is hardly the end of it anyway. There is already talk of the Greeks needing a third bailout, and if this comes up – look out.

The British economy sends 40% of its exports to the European Union. Because of this, the Pound is tied to the Euro to a certain extent. As the world feels a bit better about Europe at the moment, the Pound has gotten a bit of a bounce. The Dollar on the other hand is gaining overall, so if we see a massive move into the United States, this pair will more than likely fall.

1.60

As for myself, I see this pair as essentially being “stuck” in the range between 1.60 and the 1.56 handle. The pair looks as if it is waiting on something, and as far as I can see it is Europe itself. While I am very bearish of the Euro and Europe in general, the Pound isn’t a currency that I favor in general. It is through that prism that I look at this pair.

The 1.60 level to me is where I am proven wrong. The 1.59 level is actually the start of the resistance, and we could even see the pair soften at present levels. If the pair manages to close over the 1.60 level, it is at that point where I have to admit something has changed, and I will be long of the pair. This shows that the pair is picking up momentum and also has broken the top of the shooting star form a couple of weeks ago – another massively bullish sign. Until then, I am looking to sell weakness as it appears.