The GBP/USD pair has had a very negative run for a couple of months now, and as a result I believe that the bearish pressure will continue. As I write this article, the 1.55 level is being tested for support, and it could very well offer a significant amount of buying pressure. However, it appears that this market is ready to break down a little bit so I think that were going to head down to the 1.50 handle. That’s my target by the end of the quarter should be targeted.
That being the case, I think that you can sell rallies every time they happen, as the US dollar continues to be favored. However, the one thing that I am seeing for the first quarter is that the US dollar should strengthen for a while, but I also recognize that we aren’t that far away from some type of correction. In this market, I think that once quite nicely with the 1.50 level which I think has a significant amount of supportive pressure down to the 1.49 or so. In other words, think of it as a “zone.”
A quarter of two halves
I believe that this quarter is going to be very pro-US dollar initially, but eventually we will see the British pound regain its footing. Ultimately, the market should start to bounce from there significantly in in a sense I believe we are looking at a larger consolidation area between roughly 1.50 on the bottom, and 1.70 on the time. In other words, I think that the leader we get into the year 2015, the better this pair is going to look.
I know this goes against a lot of the consensus, but quite frankly I think that people are putting far too much faith into the Federal Reserve raising interest rates. I think there are quite a ways away from doing so, and that being the case I think the US dollar is essentially overbought. This is especially true against the British pound, which unlike other currencies such as the Euro and the Yen doesn’t have as much negativity attached to it.
