The GBP/USD pair went back and forth during the Monday session, essentially closing unchanged. We are bounce around just above the 1.49 level, an area that could cause a bit of support as it is a “big around psychologically significant number.” Looking at this chart, we are most certainly in a downtrend, so buying is completely out of the picture. In fact, any rally at this point time should be welcomed by the bears as an opportunity to sell this market yet again.
Looking at the shape of the candle, is very neutral, and essentially tells us that the market is a bit “confused” at this point. But it also suggests to us that there isn’t enough buying power to bounce this market significantly from the 1.49 handle. The 1.50 handle above is most certainly more resistive, and it is from that level that we would really start pile on the short positions, especially once the market shows they can get above it.
Going forward, the Bank of England will continue to add to their monetary policy; even though they didn’t do it is last meeting. This mainly could be because of the incoming Chairman and the unwillingness of most central banks to make a significant move before the new leader comes in. However, with the British economy acting the way it is, it’s very likely that the central bank will have to do something. This is essentially what the market has priced then, and if for some reason they choose not to, this could cause a bit of a super spike in this pair.
However, as the numbers get worse and worse out of London, it’s more likely than ever that we will see continued weakness in the Pound. We believe that going into this decline that we could see a move down to roughly 1.46 or so, and it won’t necessarily be a straight shot down. This could be more of a grinder, much like we sold during the month of February. As for buying this market, we would not consider it into we broke above the 1.53 handle as it would show momentum switching drastically.
Written by FX Empire