GBP/USD Forecast January 27, 2012, Technical Analysis

GBP/USD rose again on Thursday as traders continued to buy the Pound in general. The move higher has been pretty impressive, but the truth is that the pair had entered a downtrend a couple of months ago, and the run down to 1.53 certainly will have put a dent in overall sentiment in the Pound by bulls.

The candle formation for Thursday is a shooting star, and it is formed right at the start of a strong resistance area t6hat measures from 1.57 to 1.58 or so. With this in mind, we also look at the 100 day EMA that this happened. The shape of the candle and well lined up timing appears to not be a mistake. The signs are all bearish at this point, and it should also be noted that the recent bounce has been far overdone at this point in time, even if it were the start of a trend change.

The breaking of the bottom of the shooting star for Thursday would be a massive sell signal as it shows the most recent buyers are now losing money. This becomes a compounding problem for the bulls as those who are liquidating also are selling – pushing prices lower.

Because of the recent economic news out of London, it is hard to get excited about the British economy. They are simply far too exposed to Europe to believe the outcome is going to be good for the Brits. The GDP number the other day was a horrible miss and perhaps this pair is ready to fall again as the British economy continues to fall overall.

The reaction to the Federal Reserve’s decision to keep rates low was also probably an overdone one, and as a result we have this exhaustive candle. While the trend changing may or may not be real, the fact is that this pair simply has to pull back to gain traction anyway. Because of this, we prefer the selling of it overall, and will get short of this market on a solid break below the bottom of the shooting star. Buying isn’t possible until we are above the 1.58 level on a daily close.

GBP/USD Forecast January 27, 2012, Technical Analysis

Written by FX Empire