GBP/USD Forecast May 25, 2012, Technical Analysis

The GBP/USD pair has fallen again during the Thursday session to test the support level at the 1.5650 level. The level was our “line in the sand” for the bulls, and the fact that we have touched it for the session suggests that a decision has to be made now.

The pair is well-known as a risk sensitive market. This allows the traders to trade it against the overall backdrop of market sentiment, and it has to be obvious by now that the overall sentiment out there is decidedly negative in financial markets. This allows the trader to have an overall bias with ease in this market.

The level at the moment is 1.5650 as far as we are concerned. We don’t necessarily like buying this pair overall, as the fall has been very obvious and without concern. The candle for the day is a shooting star, and a break of the level would signal further bearishness. The shooting star at the bottom of a fall can be a very bearish sign as it shows no real attempt at a rally. It is because of this that we think the pair will more than likely fall given enough time.

The close below this level would have us aggressively selling this pair until at least 1.55, and if we gain downward traction – 1.50 or so. The fall would be stunning, but a lot of the risk related pairs look very poor at the moment so this isn’t going to happen in a vacuum by any means. Because of this, the catalyst probably isn’t even going to come out of America or Britain. We would wager our money on Europe being the cause.

The pair could bounce though, but we see this as a rally that needs to be faded. The fading of a rally on signs of weakness at the 1.58 handle and the 1.60 level are both reasonable plays in our opinion as well, and of course we are willing to sell this pair hand over fist below the bottom of the Thursday range.


GBP/USD Forecast May 25, 2012, Technical Analysis

Written by FX Empire