By: DailyForex.com
The GBP/USD pair initially rose above the 1.60 level in a sign of bullishness during the Wednesday session. However, by the end of the session we fell back down below it and formed a shooting star. This obviously is a very bearish sign, and it appears that we may be heading lower.
On the chart, you can see that I have a red moving average which is the 100 exponential moving average that is a common one larger traders will use from time to time. While I'm not necessarily a major proponent of moving averages, I am aware the fact that many traders are. Because of this it has somewhat of a "self fulfilling prophecy" vibe to it and has to be at least acknowledged.
It is because of that moving average and the fact that we are below the 1.60 level that a break of the shooting star to the downside would in fact be extremely bearish. In fact, I believe it is even more bearish just because of the confluence of ideas.
Run to the Hills!
In it appears that the safety trade is starting to come back into play, and today's session could be very pivotal after the massive selloff that we saw around the world during Wednesday. Because of this, further weakness should send this pair into a bit of a freefall, and I would suspect we would be at the 1.57 level before it's all said and done.
Because of all this, I am much more interested in selling this pair as I think the downward momentum is really starting to pick up. However, I have to admit that if we managed to break the top of the shooting star it would be a massively bullish sign. If that happens, I would have to start buying the pair simply because it would look like a rounded bottom is still forming. With that in mind, I have a bit of binary trade lighting up, and will simply trade in the direction of the break out of the Wednesday range.