The GBP/USD pair fell during the bulk of the session on Wednesday, but found enough support near the 1.5250 level to turn things back around and form a nice-looking hammer. The hammer of course suggests that the buyers are coming back into play, and we have seen several hammers recently, and as a result the market looks as if it is probably getting ready to bounce. With that being the case, the market will more than likely try to reach back towards the uptrend line that we have recently broke down through, and the 1.55 level will offer quite a bit of resistance. Short-term buying opportunities may present themselves, but we still believe that there is a significant amount of resistance above. With this, we feel that the short-term buyers will take advantage, but the longer-term downtrend that is starting to form could be confirmed.
As long as we can stay below the 1.55 level, the market will continue to favor the downside ultimately, but in the meantime there could be opportunities for those who are bullish. If we do get above the 1.55 level though, this market should then go much higher, perhaps heading to the 1.58 level. Regardless, the one thing you can count on as volatility considering that there is a jobs number coming out tomorrow. That of course influences the US dollar in general, and as a result that should influenced this pair specifically. The hammer of course is perfect, and that is probably the only real reason to think that the market could bounce. Ultimately, the market is going to offer opportunities on multiple time frames, but in the end we are going to have to make a decision soon. The liquidity has come back into the markets after the summer break, and that of course will move this market drastically and perhaps show us a strong trend in one direction or the other. While it does look like it’s broken down, it’s not really into we get below the 1.52 level that it looks like we’re going to fall apart.