The GBP/USD pair initially fell during the course of the session on Thursday, but found enough support below to turn things back around and form a little bit of a hammer. The hammer sits just below the 1.57 level, and as a result we think that the market may try to break out to the upside. On the other hand, if we break down below the bottom of the hammer, that would be a very negative sign, and as a result we would be massively short of this market at this point in time. We are not interested in buying, because we see quite a bit of resistance all the way to the 1.5850 region.
This pair in our opinion is probably more about the US dollar than the British pound itself. Yes, the British pound has been rather weak against the US dollar, but at the end of the day we feel that the US dollar simply cannot be shorted for any significant amount of time. Even if we broke above the 1.5850 level, we think that the 1.60 level would offer quite a bit of resistance as well. Longer-term, we need to get above the 1.60 level in order to hang onto a trade for the longer term.
Ultimately, we think that the market is probably going to be fairly quiet during the session, because it really isn’t anything going on that should move the markets drastically. If anything, we feel that the markets will probably fall based upon the handful of US announcements. There’s nothing going on in the United Kingdom it should move the Pound for any significant opportunities, so therefore we feel that more than likely this is a pair that probably best avoided today. However, we do have a couple of the aforementioned areas to look at for longer-term and larger moves.
If we do finally break down, we believe that this market will test the 1.55 handle given enough time. However, in this environment we may just simply dressed sideways again and again from level to level.