The GBP/USD pair has absolutely fallen apart over the last couple of sessions. This is ironic, considering how it seemed to be so resilient over the last couple of months, even as the Euro weakened, and risk wasn’t in favor on most days.
The pair is suffering from a lot of different things at once, most of which can be blamed on Europe and its problems. The Brits are obviously highly exposed to the European mess, and a recession on the continent would hurt the British economy as well. It has been suggested by the Bank of England lately that the economic outlook is getting weaker. While there is concern about inflation as well. Not a great combination and the Pound will pay for this.
The cable pair typically will follow risk appetite on a global basis, and that is simply going away at this point. The fact is that the cable pair has very little going for it all of the sudden, and as a result I am no longer thinking of buying at all.
200 day exponential average
The 200 day exponential moving average has been smashed through by the market over the last day or so, and it now will attract sellers on the longer-term charts as well. The pair looks very weak, but it has been falling so hard that it seems a bounce is likely and welcomed as an opportunity to sell.
The 1.5750 level is a big one below, and I think that if the level gives way this pair will run much lower. I have several targets, with 1.55 being the first one, and 1.50 coming after that. The pair can really meltdown when there are bad times, and although we aren’t there yet – a massive selloff in riskier assets wouldn’t be a massive surprise at this point.
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The pair is coming upon the 1.5750 level, so a short-term bounce could be in the cards. If so, I am looking on the hourly charts for weakness to sell. If not and we slice right through the 1.5750 level, this would be even more bearish and I would get very aggressively short. I am not buying at all, period, end of story.