The GBP/USD pair rallied during most of the session on Monday, but as you can see found so much resistance above the 1.64 handle that we ended up forming a wicked shooting star. Because of this, I think that the market will in fact pullback over the next several sessions, and this makes sense, as we have been so parabolic recently.
That parabolic move of course needs to be recovered, as buyers will want to get involved in this market who have been left out. I can see quite a bit of support coming in at the 1.62 handle, and that is exactly where I would love to see this market fall towards. If we get down there, I would be more than willing to buy supportive candles as it would make perfect sense from a technical analyst’s standpoint.
Nonfarm payroll week will make this market relatively soft.
I believe that the pullback will be largely due to the fact that we have nonfarm payroll numbers coming up on Friday, which of course trump any other economic announcements under normal circumstances, but especially so now. While the world worries about what the Federal Reserve can do as far as tapering off of quantitative easing, they will be concerned about whether or not the jobs number comes out strong enough to push this pair down. It makes sense, and quite frankly it's healthy for the British pound to pullback as it has gone so parabolic.
Sometimes the market simply lines up technical signals with fundamental ones, and that might be what we are getting ready to see. On the other hand, we could break the top of the shooting star, which of course is a very bullish sign. However, this is such a parabolic move and it would be so extended at this point time that I would not bother buying. I believe that this could be a very quiet week in general, and this pair might drift lower, so if you are a short-term trader, you could sell it I suppose, but I feel perfectly comfortable waiting for the pullback.
