GBP/USD Forecast January 6th, 2012, Technical Analysis

The GBP/USD pair saw a weak session on Thursday as the traders came back to worrying about the European debt issues over the session. The pair looks very weak at this point, and it is worth noting that the most recent low was lower than the ones before, and that the most recent high made a couple of days ago is lower than the ones before it as well. Although this pair has been consolidating, it looks as if the pair may be starting to “tilt” to the downside a bit more.

The 1.57 to 1.58 level has been massive resistance in this pair over the last two months, and the fact that we couldn’t even retest it this time suggests that the downside break is finally coming. The 1.53 level below is the bottom of a massive support area that starts at 1.55, so it will be a bit of a struggle to fall, but the market certainly seems to be favoring that direction at the time.

Looking at the charts on the longer-term basis, the weekly shows a massive head and shoulders of the complex variety that would be triggered if we manage to close on the daily chart below the 1.53 level, which makes the area even more interesting to us. The daily close for today is going to be interesting, and if we manage to close below the 1.53 line – we are selling this pair hand over fist, as the above mentioned head and shoulders suggests a run down to the 1.40 level.

The upside certainly looks possible, but this would only be for a quick scalp as the 1.58 has been so resistive. Non-Farm Payroll comes out later today, so knowing that – it might be hard to trade this pair today. The GBP/USD pair is often severely affected by the report, and as a precaution, one shouldn’t be buying or selling this pair before the report. Of course, there is always the possibility that there is news out of the European Union that upstages the report, but odds are that won’t happen. We are selling rallies in this pair, and would be aggressive sellers on a close below the 1.53 handle.

GBP/USD Forecast January 6th, 2012, Technical Analysis

Written by FX Empire