The GBP/USD pair fell precipitously during the session on Wednesday yet again, showing that the British pound simply cannot get out of its own way. Now that we have fallen below the bottom of the hammer from Tuesday, it looks like we are without a doubt trying to really break this pair down. The 1.55 level did hold a support during the session, but looking at the failure of any type of bullishness in this pair recently suggests that it’s only a matter time before you break that level down.
This is going to be a very difficult pair to sell though, as there is a lot of noise between here and 1.50 or so based upon the ascending triangle from last year. The British pound has been pummeled, so it seems a bit tough at times to be sure this pair, but it has become obvious that you simply cannot be long. If that’s the case, you essentially have two choices at this point: you are either short, or flat.
There is still quite a bit of concerns that the United Kingdom is going into a triple dip recession, and adding to that is the fact that the incoming Bank of England Chairmen Mark Carney is going to be ultra-easy and therefore very rough on the value of the Pound. Another thing that adds to this situation is what is currently happening with the Euro.
As the Euro continues to gain and the general trust in the European Union continues to climb, money is coming back out of the United Kingdom and back into the continent. There had been an exodus of capital out of Europe and into the United Kingdom recently, and we may be seen the results of a mass exodus out of London. If that’s the case, this move could last a little bit longer than we had originally anticipated. As for buying this pair, we will not do it until we break above the 1.59 on a daily close. In the meantime, we have to assume that all rallies are to be sold in this market.
Written by FX Empire