The GBP/USD pair initially tried to rally during the course of the session on Monday, but struggled at the 1.55 level as it is a massive resistance barrier. The 1.55 level of course has a certain amount of psychological significance, but it has been resistance in the past. The fact that we pullback from here and formed a shooting star only strengthens my opinion of this resistance barrier, and I feel that we will continue lower on a break down below the bottom of the shooting star for the Monday session.
Don’t get me wrong, I don’t anticipate that this market will fall apart, I just think we are going to continue to grind away in the overall consolidation area. I think we could go as low as the 1.52 level, and still hold that consolidation at this point in time.
Volatility Either Way
It really doesn’t matter what happens at this point in time, I think we will continue to see volatility. This is a market that has a lot of support and resistance barriers at various levels, so it would not surprise me at all to see quite a bit of choppiness. With this being the case, small positions are probably going to be the best way to go, or perhaps binary options if you have that ability at this point.
If we can break above the 1.55 level however, that would be very bullish. It would not only break above the psychologically significant 1.55 handle, but it would also break above the top of the shooting star, which in and of itself is very bullish. In fact, that’s one of the more reliable signals as it shows quite a bit of resistance being sliced through and should bring in quite a bit more buying pressure. I think at that point in time the market could very easily end up at the 1.57 handle. Having said that though, I believe more consolidation is likely.
