The GBP/USD pair went back and forth during the course of the day on Thursday, forming a little bit of a hammer. That being the case, it looks as if the 1.50 level is in fact going to offer support, and the fact that the nonfarm payroll numbers come out today we suspect that this market will be very volatile. The 1.50 level is important on the longer-term charts, and the support extends all the way down to the 1.48 handle in our opinion. Because of this, we think that there is much more danger to the upside than the down, making this a potential countertrend move.
That being said, the fact is that we could have a longer-term buy-and-hold situation set up your but remember that when trends change, they tend to be very messy affairs and it takes quite a bit of nastiness back and forth in order to finally convince the market in which direction it wants to go. Because of this, we expect a lot of choppiness but ultimately it is not until we either get below the 1.50 level that we would consider selling, or some type of massive bounce that show signs of resistance. Ultimately, we feel that the market will make some type of stand or at least move in the near term, and the nonfarm payroll numbers might be the reason that we do it.
If we do bounce we are, we expect the 1.55 level be targeted, but that level is massive resistance. It’s really not until we get above the 1.57 level that we would consider the trend “officially changed”, so we are going to be a bit cautious about our trading. We recognize of volatility will be the order of the day, but if we were going to see some type of trend change, this area would in fact be a perfect place to see it. On the other hand, if we did manage break down below the 1.50 level, and then ultimately the 1.48 level, this would be disastrous for the British pound.