The GBP/USD pair fell during the course of the session on Monday, but more importantly broke down below the bottom of the shooting star from Friday. Because of this, we have become bearish of this pair yet again, and believe that we are heading to the 1.48 level next. After that, we should then head to the 1.46 level given enough time, but we recognize that it might be a bit of a fight to get down there over the course of the next couple of sessions. The British pound has continued to be in a long-term downtrend for quite some time, and as a result we feel that the trend will continue to weigh upon any type of buying pressure going forward.
We believe that the 1.48 level could be a bit of a support area, but it will be minor at best. Because of this, short-term traders will probably take profits in that area. However, a bounce off of that level should just simply offer yet another selling opportunity. On top of everything else, the US Dollar Index looks very bullish as we broke the top of the hammer from the Friday session as well, essentially showing a mirror image of this market, but turned upside down.
Keep in mind that the US Dollar Index is heavily weighted towards the EUR/USD pair, so you can’t use that as an indication of where the GBP/USD pair will go necessarily. However, gives you yet another reason to think that the US dollar will strengthen, driving the price of this pair lower.
The 1.50 level of course would be resistive still in our opinion, and truthfully we don’t believe that the market can get above there. Even if we did though, we feel that the 1.52 is the top of the resistance, so really it’s not until we clear that area before we would consider buying with any long-term ambitions. Quite frankly, this point in time this is still a “sell only” type of market as far as we can see as the US dollar is so strong.