The GBP/USD pair fell during the course of the day on Monday, as we crashed into the 1.5350 region. We are testing the very bottom of the hammer that was formed on Friday, and that of course in my opinion is a very negative sign. If we can break down below the bottom of the hammer, we are more than likely going to head to the 1.52 level. That area is supportive, but we could even break down below there given enough time.
Looking at this chart, you can see that I have a decent trend line drawn that we have broken below. This trend line lasted all summer, and now that we have broken below and look as if we are ready to continue going lower, I think that more than likely we are going to see lower pricing. I think that rallies could also be trouble waiting to happen as well, and I would be willing to sell resistive candles all the way back to the 1.55 level. After all, that is a large, round, psychologically significant number, and it’s roughly where the uptrend line crosses now.
Selling rallies, selling breakdowns
I believe that selling rallies that show signs of resistance will be the way to go going forward, and that eventually we will get that opportunity. Once we do get a resistant candle near that area, I am not hesitating at all to sell. I also think that if we can break down below the bottom of the hammer from the Friday session, I think it’s time to start selling as well as the 1.52 level is all but assured to be had.
The 1.55 level above seems to be a bit of a barrier to go higher. If we get above there on a daily close, I would be willing to answer the move by buying the British pound again as it would wipe out all of the bearishness. However, I think that the one thing you can count on is volatility.
