GBP/USD Forecast Dec. 9th, 2011, Technical Analysis

The GBP/USD pair poked above the 1.57 level on Thursday as traders got long of the pair on optimism about the outcome of the EU summit. However, as headline after headline came out, the markets got more and more disappointed in the possible outcomes, not to mention the lack of bond buying by the ECB made the “risk off” trade the one to go with. The 1.58 level has held yet again in this pair, and the pressure to the down side is certainly building.

With this in mind, we are expecting the 1.58 – 1.55 level to be the consolidation that the pair chooses in the short-term. The 1.55 level is the start of massive support down to the 1.53 level. The breaking of the 1.53 handle would have us selling very aggressively as it would be a major break of support in this pair. The cable pair is very risk-sensitive pair, so that fact that it fell isn’t much of a surprise, and the problems in the EU are going to have a severe effect on the cable and Pound specifically. The UK sends over 30% of its exports to the EU, and as a result the economy in Britain will certainly be exposed to issue on the continent. Because of this, the cable pair could be just as volatile as the EUR/USD pair over the next 24 hours.

When the announcement from the EU summit comes later, the world will sit still. If the market doesn’t like the “solutions” that the Europeans come up with – this pair will fall hard. The Dollar will certainly be the currency that people will want to be in at that point in time. The safe haven status of the Dollar will continue to be a magnet for the market until the EU mess can get taken care of. All should be known by Monday morning on how the risk appetite will play out in this and many other pairs around the Forex market.

Although it looks very bearish at the moment, trading this pair before the EU announcement is probably akin to gambling. The outlook doesn’t look good, but there is always time for a surprise between now and then.


GBP/USD Forecast Dec. 9th, 2011, Technical Analysis

Written by FX Empire