The GBP/USD pair fell significantly during the Wednesday session again, breaking the bottom of the hammer that had been formed on Tuesday. Because of this, I have to admit that the support that I expected for this pair never appeared during the Wednesday session. The Tuesday hammer did look very supportive, and it also look like it was the start of some type of basing action. However, as you can see the bottom of the hammer has been broken, and this is of course a very bearish sign.
Looking at this chart, the fact that the pair close of the very lows of the session does not bode well for the British pound. There are concerns of a triple dip recession in the United Kingdom, and perhaps some of the relief going on with the Euro has money flowing out of the United Kingdom and back to the continent. It should be obvious by now that the British pound simply cannot be bought under the circumstances. In fact, in order to start buying this pair, I would believe we would have to be above the 1.59 level as it would show a serious break of resistance.
1.55 And beyond
Now that we have closed at roughly 1.5525, I believe it's only a matter time before we attempt to break through the 1.55 handle. Perhaps a bounce will come first, which simply should be an opportunity to sell from a higher level and pick up more momentum in order to break down that level. However, there is a lot of noise below, and I believe that the remnants of the ascending triangle from last year will be a hindrance to the sellers. Ultimately, I think that the 1.50 level could be targeted though.
With all that being said, it's obvious that the downtrend is in full fact, and certainly strong. This doesn't mean that the pair is going to meltdown though, as all of that noise previously should offer little minor support areas here and there. Because of this, if you choose to try and settle this pair, you may be rewarded by waiting for rallies to fade rather than trying to sell momentum.