By: Christopher Lewis
The GBP/USD pair is an interesting one to me lately, as the pair is typically a risk sensitive one. The fact that it continues to attempt to get higher in value is interesting as well, as it has been fairly obvious that there is a real chance that the Bank of England will look into ways to execute further quantitative easing going forward as well.
The fact that the Brit also sends 40% of their exports to the European Union would also concern me. The Pound should suffer as the British economy lags due to the fact that the Europeans are going into recession. The biggest customer of Britain will be spending less, and this should be bearish for the UK overall. Having said that, the market hasn’t really reacted as such, but it is sometimes behind in timing as well. When this happens, you can only turn to technical analysis.
The 1.60, 1.59, 1.58……
The pair has been a bit choppy in its recent consolidation as the 1.60 resistance level looms over the market. There is also an obvious one at 1.59, and it could even be part of the 1.60 resistance level, effectively making it a 100 pip thick zone. I also see the 1.58 level as a bit supportive, and it is this level that could be important for the pair going forward.
.png "GBP/USD Daily 3/22/12")
If we can get a daily close below the 1.58 level, this would show all of this resistance holding the market down, and we could see a move down to the 1.5650 level. After that, we would move to the 1.55 and 1.53 levels. With this in mind, it is essentially saying the same thing as short this doji that printed Wednesday if it breaks the bottom of the daily range. However, clearing that 1.58 level also gives the added bonus of clearing the last of the support. Also, one would have to think that headline shocks out of the European Union could also push this pair down as traders buy Dollars in a bid to participate in the “safety trade”.