The GBP/USD pair rose drastically during the course of the day on Friday, mainly in reaction to the Scottish Independence Vote failing. Since the Scots are staying within the United Kingdom, the game a bit of a reprieve for the British pound, but you can see that it was fairly short-lived. In fact, as soon as we got to the 1.65 level we saw significant amount of selling pressure, and a return to the very bearish momentum that we’ve seen in the British pound.
However, the 1.6250 level is an area of support considering that there was a gap there. We broke above it in preparation for the Scottish vote, but as you can see that resistance should now end up being supportive. Ultimately, we ended up forming a very negative candle, but it is not until we close below that gap that I would feel comfortable selling.
Range bound
As far as I can tell, it’s likely that this market will continue to be range bound, simply because we have a nice-looking hammer just below. The 1.65 level above is resistance, and I believe that the 1.6250 level below will be supportive. I think that the market should chop around in this general vicinity, and as a result I think this is going to be more or less a short-term trading opportunity waiting to happen. It is not until we break above the 1.66 level that I feel comfortable buying with any length of time involved.
If we break down from here though, I think that the 1.60 level should be the next target, and end up being massively supportive based upon longer-term charts. With that, I don’t think it will break down below there anytime soon. I think this is going to be very messy and choppy trading, especially considering that the movement has been so back and forth, and as a result I think that the market is more or less going to ignore the British pound in general, bringing much-needed calmness to this marketplace, which of course also lends itself to being consolidated.
