The GBP/USD pair initially tried to break higher during the course of the day on Monday, but found far too much in the way of resistance somewhere near the 1.54 level. Because of this, we ended up forming a shooting star, and I suspect that the market may struggle at this point in time. Because of the shooting star, I suggest that perhaps this market will fall from here. If we can break down below the 1.53 level, we could then continue to go much lower. By “much lower” I mean the 1.52 handle, and perhaps even as low as the 1.50 level. Regardless, we are going to be playing a lot of “small ball” at this point in time as the currency markets have absolutely fallen asleep. This is probably due to several factors at the moment.
I blame the Federal Reserve
The Federal Reserve essentially told the markets that they had no idea what they were doing when they suggested that they could not raise rates. On top of that, we didn’t really get any clarity afterwards, so it seems as if the markets simply don’t know what to do. That’s not a huge surprise, and as a result I think that we will continue to see very short and sudden moves. At the end of the day, I think that a longer-term move is simply out of reach at the moment.
Having said that though, we did break down below a significant uptrend line, and retest it for resistance. That of course is classic technical analysis and suggests that we could be seeing a bit of a trend change. I don’t know about that, but it does suggests weakness at the very least.
I am much more comfortable selling this market on rallies based upon short-term charts than anything else. With that being the case, I will look to the short-term charts and simply fade rallies as they appear.
