The GBP/USD pair initially fell during the day on Wednesday, but bounced enough to form a little bit of a hammer above the 1.48 handle. Due to the fact that it’s the holiday season, I do not anticipate seeing any type of major move in one direction or the other. Having said that though, I do recognize that we are most certainly in a downtrend although we are in the middle of a cluster of trading from March 2015.
With that in mind, I think that we could get a bounce but quite frankly at this point time I’m willing to sell that bounce. I believe that there is a significant amount of resistance there at the 1.50 level based upon psychological resistance, and the fact that it was previously supportive. When you look back at the trading month of March, you can see that the 1.50 level was certainly resistive then as well, so “market memory” dictates that it will be again.
Breakdown
I believe that if we can break down below the 1.48 level, that’s a selling opportunity as well. Quite frankly this point in time I don’t really have a scenario in which I want to buy this pair, as the US dollar is without a doubt the strongest currency in the world right now. I believe that this pair will grind its way down to the 1.45 handle given enough time, and that it’s only a matter of time before we reach there. I think that it could be a bit bumpy along the way, but each time we rally on the short-term chart it should represent value in the US dollar.
A move above the 1.50 level could be a very significantly bullish sign, but I really don’t think it matters until we clear the top of what has been a fairly obvious down trending channel. That would mean a move above the 1.52 level, and that certainly isn’t going to happen anytime soon in this type of environment.
