GBP/USD Forecast January 10th, 2012, Technical Analysis

GBP/USD rose during the session on Monday as the pair reached the bottom of its recent consolidation zone. The last time we reached this low, the pair bounced a bit, but failed to reach the top of the consolidation area. This normally signals further weakness heading into a breakdown going forward. However, it is far too early to buy into that story yet, rather this was a signal to pay more attention to this pair.

The 1.55 area was once far more supportive than we have seen it over the last couple of weeks, and ran all the way down to the 1.53 level. While the 1.53 level still is there and supportive, it should be noted that the support in general is getting “thinner” on the chart, and this shows that the sellers might finally be making headway against the buyers. The pair certainly does look a bit on the weak side, and as a result it is probably only a matter of time before we see 1.53 give way.

The 1.53 mark is important as it would signal a breaking of the neckline in a massive head and shoulders patter from the weekly charts. This pattern measures all the way down to 1.40 or so, and would signal a massive shift in the bullishness of this pair that we have seen in the last couple of years. The most immediate trend is still down, and this would be a confirmation of the overall downtrend that started during the financial crisis a few years ago.

With all of this in mind, we are looking to sell this pair only at the moment. A daily close above the 1.58 area is what it would take to buy it as that is the uppermost resistance in the immediate future. The closing below 1.53 on the daily timeframe would have us selling for the long-term. If this breakdown does in fact happen, we are looking to sell this pair, and then every other rallies that appears in the short term afterwards as this would signal a massive breakdown.

GBP/USD Forecast January 10th, 2012, Technical Analysis

Written by FX Empire