The GBP/USD pair initially fell during the course of the session on Tuesday, testing the 1.46 level for support. With this, the market turned back around and Rose all the way to the 1.48 level. This was an area that was supportive previously, so we now recognize that it should be resistive. With that, we are not surprised to see that the market stopped in that general vicinity. There is a significant amount of resistance between the 1.48 level and the 1.50 level above, as it is a “zone” of selling pressure in our opinion.
We are simply waiting for some type of supportive candle in order to start selling again, but recognize that the markets could be very choppy in general. It is not until we get above the 1.52 level that we would consider buying this market, because the US dollar is so favored in general. We believe that the markets ultimately should continue to have a bearish overtone, but also recognize that there will be bounces from time to time. Those bounces offer selling opportunities as far as we can see, as the US dollar is simply taking a break at the moment.
When you look at the US Dollar Index, we pulled back slightly from the 100 level. That of course is a large, round, psychologically significant number. Ultimately, rallies should be simple opportunities to take advantage of weakness in the US dollar, as it will appear from time to time. The US Dollar should continue above the 100 level in the US Dollar Index, and as a result we should sooner or later see this pair break down. If we can get below the 1.45 level, we should then head to the 1.40 level given enough time.
We do not anticipate this market breaking out to the upside, so quite frankly at this point in time we are not interested in buying. We believe that the longer-term trend continues to favor the US dollar, and as a result we have no interest in going against it as the Dollar continues.