The GBP/USD pair had a fairly volatile day as the Wednesday session produced a long-legged doji candle. The pair is currently trading in a massive resistance area above the 1.58 mark, and because of this we expect this pair to have trouble with the upside as it will be rather heavy at these lofty levels.
The pair is very risk sensitive in general, and as a result it will often move with the stock markets around the world. The 1.58 level looks supportive at the moment, but it is a minor level to say the least as it has been broken through several times recent from both the low and high sides. The choppy action has been difficult for all but the best scalpers to prosper in, but if you were quick, there have been several trades recently.
The 1.59 to 1.60 level above should offer resistance going forward, so we are more than happy to sell on any signs of weakness in this zone. The breaking below of the 1.58 handle would signal a selling opportunity as well as the pair goes looking for the 1.5650 level, and then the 1.55 handle.
The British economy should continue to be plagued by both quantitative easing, and the proximity to Europe. The Brits are unfortunate enough to rely on the European Union as a destination for 40% of their exports, so the fact that the area is in financial trouble doesn’t do the UK economy much good. The Pound will suffer as a result, and of course the Dollar should do well as the world runs to the safety of the reserve currency.
We are not willing to buy this pair at these levels, and would wait until there is a daily close above the 1.60 mark in order to do so. The selling of this pair would be feasible to us on a daily close below the 1.58 level, as it would not only break the bottom of this doji, but it also breaks though the remainder of the support below as well.
Written by FX Empire