The GBP/USD pair fell again during the Monday session, but as you can see by the daily chart found quite a bit of support at 1.58 level. This is an area that I had suspected could cause a bit of a bounce, and so far it looks like my assumptions are holding somewhat true. This is because of the fact that is where the markets broke out of the massive ascending triangle during the summer that sent this pair to the 1.63 handle.
After all, it's a basic tenet of technical analysis that a level that was once resistance should become support later. The real question now is whether or not a blowhole. The candle on Monday wasn't enough to make that assumption, but it certainly doesn't look like the 1.58 level was ready to give way right now. With this being the case, I will be watching this pair intently as I do believe there is potential that we are entering a massive consolidation area now.
Too far, too quick
I believe that the move down from the 1.6150 level has been much too quick. After all, on the other side of this equation you have the US dollar, a currency that is being printed into oblivion. Sooner or later, traders will begin to understand that although it appears that the British are going to have to print currency as well, nobody has as many printers as the Federal Reserve.
Because of this, I believe that eventually we will see a return to the 1.63 handle. In fact, I see that as the top of a larger consolidation area from 1.58 up. This looks like a pretty significant move, but we have visited it twice over the last couple of months. Because of this, I am more than willing to be patient about going long of this pair.
I am going to watch the next couple of sessions and see if we get enough support in order to go along alternately, I believe that this pair has far too much noise below it in order to collapse. I could be wrong, that's of course why I'm waiting to find that supported candle.