The GBP/USD pair fell during the course of the session on Monday, testing the 1.52 level. This was the area that had offered so much resistance previously, so the fact that we came back to test it for support really wasn’t a big surprise. On signs of support and bullishness in this general vicinity, we are willing to buy this market as we think the British pound would then head towards the 1.55 level, which of course is the next major resistance barrier. We have no interest in selling this market at the moment, although we certainly recognize that there is a significant amount of downward pressure. There is far too much in the way of noise between here and the 1.50 level which we see as a massive support barrier.
There are few round numbers out there that are going to mean more than 1.50 in a currency pair, so it makes sense that the market will continue to find buyers in that region, and because of that we have no real interest in shorting this pair until we break well below there, which of course would be a significant breakdown and perhaps continuation of a longer-term downtrend. However, it should be noted that the British pound although weaker than the US dollar isn’t necessarily a weak currency in and of itself. Because of this, we think this might be the outlier in the Forex markets, and the one currency that’s going to have a fighting chance of rising against the greenback. Ultimately though, we have a hard time believing that the 1.55 level will get broken above anytime soon. If it did, there is a band of resistance all the way to the 1.58 level, so even at that point in time we would be skeptical about going long for any real length of time.
Ultimately, we anticipate seeing a lot of back and forth, and as a result will play this as a range bound market, which it certainly looks to be at this point in time. We are thinking short-term trades only at this moment.