The GBP/USD pair had a back and forth session on Monday, as the rest of the currency markets seem to be more volatile by the hour. With the problems being focused on in Cyprus, it seems that the markets had forgotten about the economic issues facing the United Kingdom, even if it was just for a day.
The shooting star from the session on Friday still hasn't been broken down, nor has been broken above. With that being said, we are essentially in the same spot we were at the end of the day on Friday, and because of this the analysis hasn't changed. I believe that we will see this market continued to fall, but we may be in a bit of consolidation in the short term.
Looking at this chart, I believe that a move below the lows of the Friday session should push this market down to roughly 1.4825 as it appears to be the bottom of the present consolidation. However, more importantly I see the 1.53 level as being very resistant, and as a result I think that this market will struggle to get above that level. Not only is there a significant shooting star that handle, but there is a gap just below it that continues to keep markets pressure to the downside.
Looking at this chart, the trade should be obvious
With the candlestick that formed on Friday, you should have been thinking about selling this pair to begin with. Now that we have formed an almost identical candlestick on Monday, it's hard to justify buying at this point. Also, it should be noted that the Bank of England Gov. Mervyn King said over the weekend that he believed the UK economy was improving, and that asset purchases should continue that. In other words, more quantitative easing should continue to be a good thing.
With that being the case, it appears that this market should continue lower, especially considering that there are signs that interest rates in the United States we have to come up slightly. With that being said, I am selling this pair on a break lower.
