The GBP/USD pair fell during the session on Wednesday as the pair triggered a sell signal by breaking through the bottom of the Tuesday shooting star. If you watched yesterday’s video analysis, you know that we called for a short position on a break of the bottom of that candle. We also suggested that this was a return to the consolidative market, not necessarily a meltdown.
The Pound will be very sensitive to global risk, and with the stock markets selling off for the Wednesday session the pair was always primed to fall. The 1.58 level below is a massive support zone though, so the fact that we came so close to it by the end of the session, this could be the “end” of the move for the time being. Because of this, if you missed the break of the bottom of Tuesday’s range, you missed the first opportunity to sell.
The 1.60 level looks like it is going to be resistive every time this pair approaches it, and as a result we are willing to sell this market on the first signs of failure close to the handle. The 1.58 level giving way would also be a sell signal for us, as it shows an acieration of bearish momentum in this pair. With that move, we would expect a fall down to the 1.56 area or so.
The pair will certainly be affected by global risk going forward, and with all of the landmines out there, it isn’t a real stretch to think that a few bad headlines could come out at anytime, and push this market lower. With this in mind, we are currently looking to sell, not buy – but we need to see the right candlestick formation in order to do so.
The pair will also have to deal with the fact that the United Kingdom is working to shift its economy into a more export-driven one, and that almost always means lower currencies as a result. It is only when this pair closes above 1.60 on the daily chart that were thinking of buying this pair.
Written by FX Empire