The GBP/USD pair fell significantly during the session on Tuesday, crashing through the 1.6650 level and heading towards the 1.66 handle. This was predicated mainly upon less than stellar CPI numbers coming out of the United Kingdom, which of course suggests that the Bank of England may have to continue a fairly loose monetary policy. On top of that, today we get the Bank of England Minutes from the last meeting, and any signs of dovish attitudes in this release could send this pair much lower.
The Federal Reserve also releases its Minutes from the last meeting during the day, so this could be a little bit of a “double whammy.” After all, if it appears that the Bank of England continues its dovish stance, while the Federal Reserve continues to become a little bit more hawkish, it makes perfect sense that this market would have to fall.
Trend is strong, not looking to buy this pair at all.
The trend in this pair is so strong that I simply have no interest in buying it. I can’t imagine the market bouncing enough for me to be interested, but I suppose if we close above the 1.68 handle, I would have to sit up and take notice. I don’t that’s going to happen, and as a result I think that the market is going to aim for the 1.65 handle, as it is a large, round, psychologically significant number for this marketplace. It is an area that has had a significant amount of influence during the longer-term charts as well, so I see no reason why it will be respected again.
Quite frankly, once we hit the 1.65 level, I would be stunned if we can get some type of significant bounce. Between now and then though, I don’t really think that stepping in front of this market is the smart thing to do. After all, there is that analogy of “trying to catch a falling knife.” This is a perfect example of that if you are thinking about buying based upon the fact that it has “fallen too far.”
