GBP/USD Forecast June 7, 2012, Technical Analysis

The GBP/USD pair managed to bounce hard finally on the session as the hammer from the previous Friday finally trigger buy orders. The pair is a risk sensitive one, and as a result we think that this pair will more than likely gain a bit as the bounce that has been so needed is finally showing up.

The 1.57 level above looks rather resistive though, and the market is most certainly in a bearish trend overall. Because of this, we suspect that there is a selling opportunity coming, and will do so if we see weakness at that area. However, we will wait until we get a daily close in order to do so.

The Chairman of the Federal Reserve is speaking before Congress today, so future outlook on Federal Reserve policy will try to be interpreted from his testimony. Any mention of quantitative easing by the Chairman will certainly punish the US dollar, and send this pair much higher. This could actually have the effect of having the bulls ignore the 1.57 level altogether.

The UK is supposedly going to be easing as well, and as a result this pair will become a battle between two central banks that are trying to race to the bottom of the currency spectrum. The idea that weakening the currency will allow exports to strengthen is one that the central bankers love, and there is a real chance that this pair will be an example of the much suggested “currency wars” that many expect. The idea that the loser in value actually wins is a bit of a foreign concept, but as a result we think this pair will be very volatile in general.

The Federal Reserve holds all of the cards though, as if they are going to ease – everyone sells the Dollar. Nobody knows how to kill a currency like the Fed, and as a result the pair will react to Mr. Bernanke more than anything. A break lower and under the lows form the Friday hammer would have us selling aggressively, especially if it is based upon the Fed doing nothing.

GBP/USD Forecast June 7, 2012, Technical Analysis

Written by FX Empire