By: Christopher Lewis
The GBP/USD pair fell hard on Friday as the “risk off” attitude came back into the markets around the world again. The pair is a great barometer of the risk appetite of global markets, and as a result I find it a great way to see where some of the other markets may go. For example, as the GBP/USD pair goes, so does other markets like the S&P500, Copper markets, and many others. In other words, it shows how far the trading community is willing to go out on a limb as far as risk.
The pair has been struggling to find a direction lately, and as a result many traders are getting chopped up. Of course, those who happen to be decent range bound traders will have found this market profitable lately.
1.58
The 1.58 level just below is a massive area in the sense that it has held up as support for a few weeks now, and there is also the added pressure of the 200 day EMA in the area as well. Of course, the slope of the moving average is almost non-existent, and as a result it looks as if the sideways action could continue.
The breaking below of 1.58 by this pair would be a significant move, and would also be a result of overall risk aversion in my estimation. The 1.5650 level below if the bottom of the recent consolidation area, and as a result this could simply be a return to the wider range in general. However, if we can break below that – this pair will fall much farther.
.png "GBP/USD Daily 4/16/12")
The upside is probably the harder of the two roads at the moment. In order for this pair to pick up any real amount of steam, it will have to break above the 1.60 level as well as the recent highs from last week. Also, with the massive amount of headline risks out there, one would have to think the news will somehow favor a run to the Dollar as a safe haven. None the less, I am playing these two ranges (1.58 and 1.6050) as signals in this pair.