By: Christopher Lewis
The GBP/USD pair has been rising over the last several weeks, and even managed to break the all-important 1.60 barrier. The action above that level wasn’t overly convincing though, and as a result I have been pretty leery about this market – not willing to buy it.
The reaction to the Federal Reserve’s minutes from the last meeting shows that perhaps a lot of traders in the markets were looking for more quantitative easing by the Fed. The minutes made barely a suggestion of it, and since it now looks very unlikely that the continuation of QE will be seen going forward it makes sense that the Dollar should gain.
The UK on the other hand has Europe to worry about. After all, the two economies are interconnected, and the Brits send over 40% of their exports into the region. If your biggest customer is broke – you are in trouble. The European Central Bank has a press conference later today (8:30 EST) in which we could see hints about the future direction of the central bank. The easing in the EU and lackluster growth estimates will more than likely cause a run to the Dollar, and in turn this pair will fall.
1.59
The 1.59 level is where the session ended, and at the lows. (Basically) Because of this, I am waiting to see the level give way for a few hours, and I will be very interested in selling this pair. I think that the 1.60 level should be pretty solid going forward, and a break higher than the recent highs would be a bullish sign that I would have to acknowledge. Until that happens though, I simply cannot see buying the Pound against the Dollar.
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The pair looks as if the 1.58 level should be support as well, so a reaction at that level is likely. The lows at the 1.5650 level should be tested if we can get below that area, and this is really the level that I am aiming for. The Non-Farm Payroll could also come into play on Friday, so at the very least there should be plenty of action to be had over the next few days.