The GBP/USD pair broke lower during the session on Monday, testing the 1.55 level yet again. This is an area that we believe is going to be rather supportive, but ultimately we will continue to go lower. That being the case, the market looks as if it is a market that has quite a bit of selling pressure above, so it’s only a matter of time before we break down. That being the case, it’s likely that we will go below there and head towards the 1.50 level given enough time. Any rally at this point time looks to be suspicious to us, and therefore we are very bearish and believe that the rallies will continue to be selling opportunities until we get to at least the 1.50 level. However, there is a lot of noise below so it’s very likely that it will be a little bit difficult from time to time.
Ultimately, the best route to go is to sell rallies after we get below the 1.55 handle, but we do recognize that the 1.58 level above is the “ceiling” of this marketplace. At this point time, we believe that the market doesn’t change trends until we get above the 1.60 handle, something that looks very unlikely anytime soon. On top of that, you have to keep in mind that the US dollar is without a doubt the most favored currency in the Forex markets right now. Because of this, it’s very difficult to go against the US dollar anyway, and therefore we don’t even look for those trades at the moment. It’s only a matter time before things turn around, but quite frankly we think that there is still a bit of downside to be had as the bearish pressure is so strong.
We will continue to monitor the longer-term charts, but right now we don’t see anything that has us getting excited about buying this marketplace right now. Ultimately, it’s only a matter of time before value starts enter the equation, but right now we just aren’t there yet.