By: Christopher Lewis
The GBP/USD pair has been one that continues to grind higher over time. The recent action has been very impressive, especially when you consider the fact that the markets as a whole have been pro-Dollar. The recent comments in the Federal Reserve meeting minutes suggested that there weren’t much of a chance of quantitative easing in the near term, and as a result the Dollar has been in demand.
The GBP/USD pair tends to be risk sensitive, and as the markets have found much to be concerned about, this makes the uptrend even more impressive. The recent bullish move to the 1.60 level was repelled though, and at that point I thought that perhaps we would see a bit of a fall.
We did. But that changed on Friday as the Non-Farm Payroll numbers came out at a positive 120,000 jobs being added in America last month. Of course, the consensus ahead of time was 200,000 – so this caused a flight from the Dollar overall.
Range bound
The recent action is starting to look more and more range bound, and the 1.58 and 1.60 levels look to be the boundaries. The 200 day EMA is in the neighborhood, and just below the current market price. The Thursday candle bounced off of it, and the Friday candle rose from it. The slope of the line is flat, so this also suggests that perhaps we are going to see a bit of a sideways market.
The British economy just barely avoided recession last quarter, and is highly exposed to the European Union, sending over 40% of its exports to that region. Because of this, there is a decent chance that the United Kingdom will eventually see negative growth. With this being said, I am a bit leery of owning the Pound at the moment.
.png "GBP/USD Daily 4/9/12")
The pair would have to break the 1.6050 level in order to impress me enough to think about buying. The breaking down of the 1.58 level on a daily close would be a selling signal for me, and it would show a serious break below the 200 day EMA as well. Until then, I am flat in this pair, but waiting to see the breakout – no matter what direction.