The GBP/USD pair fell during the session on Wednesday, testing the 1.51 level for support. It did find it there, so we did get a little bit of a bounce. However, we shouldn’t forget that we are in a longer-term downtrend, and as a result certain actions like supportive candles should be treated with a little bit of suspicion. It is in this light that we choose not to go long of this market, although we certainly could come up with the technical analysis the least make it looks like it’s a possibility.
We still believe that this pair goes lower, and as a result we like resistive candles in order to start selling. We think that a bounce all the way back up to the 1.55 level is certainly possible, and that although it looks rather strong, in the big scheme of things, a move to that level would be that big of a pullback.
It isn’t until we close well above the 1.55 level that I would be convinced that the British pound is going to continue higher against the US dollar. With that being the case, we suspect that this market will provide us with several different opportunities, mainly on the shorter-term charts. We are especially interested in selling resistive candles near “round numbers”, such as the 1.55 level, the 1.53 level, and so on.
The bank of England is going to continue to expand its monetary policy relatively soon, as the new Governor is coming in July, and has already suggested that he was going to bring into play a lot of asset purchases and the like. Because of this, we feel that the British pound is still overvalued, and that will continue much lower. Adding to that, restarting the see money flowing to the United States in general, especially after the blowup of Cypriot banks, and the concern that the other peripheral countries could suffer a similar fate. With that being said, we are bearish of this market, but do not have the signal quite yet, but fully expect to see one soon.
Written by FX Empire