The GBP/USD pair had a slightly positive session on Monday as traders came back to resume the consolidated of tone in this currency pair. The 1.55 level has been sportive for the last month or so, and it looks as though it may continue this way. Above, the 1.57 level is the start of a 100 pip zone of resistance and it would take a serious break above the 1.58 level for us to be comfortable going long for any length of time in this pair.
Because of the precarious situation of the British banks and their exposure to all things European, there’s a good chance that this pair will continue to basically do nothing in till some type of satisfactory arrangement in the UK can be reached regarding bank exposure. With this in mind, the Bank of England introduced new forms of quantitative easing last week to the tune of 50 billion British pounds. This is a slight positive for the Pound, but at the end of the day there are a lot of people running towards the US treasury markets. It is because of this that we think that overall this market is going to be easier to short than buy.
We feel that going forward in the foreseeable future that this pair will continue to be a good one for short-term traders. With a 200 pip zone clearly defined, we see value at the 1.55 level that could be bonds, and overextension at the 1.57 level to be sold area. The market looks like it is settling into the summertime range, and this can be one of the more profitable ways to trade if you are comfortable with range bound analysis.
With all this being said, we are willing to take a small long position in this market as we think it will eventually bounce back towards the 1.57 level. We will however, be much more comfortable selling at the 1.57 level as we see the general risk appetite of the global markets is being a fragile thing indeed. In fact, our sell positions from that area will be larger than our buy positions from this one.
Written by FX Empire