The GBP/USD pair had a positive session on Monday, but did not managed to break above the 1.58 level leaving me to believe that we are simply consolidating, and that the bullishness that we saw for the session isn't necessarily indicative of the some type of turnaround. Nonetheless, I don't necessarily think we are about to meltdown anytime soon either.
The pair seems to be consolidating between the 1.57 and 1.59 handles, and I believe this is where we will be stuck for the short term. The pair looks like one that will be excellent for short-term traders to be involved in, but I think that we are essentially at an inflection point where traders will have to make decisions on what they believe the British pound will be going over the long run.
The fall has been quite brutal and rapid. Within this chart, certainly it looks like the pair is falling apart, but we are starting to approach massive support where we had the ascending triangle last summer that shut this pair up and away. Because of this, I believe there's a lot of noise below, and although we could drift lower it's probably going to be in a much slower pace than we've seen over the last couple of weeks.
Mr. Carney is coming
Mark Carney, head of the Bank of Canada is coming to London to run the Bank of England. He has already stated that he believes that the Bank of England should keep a fairly easy monetary stance, and as a result the Forex markets have punished the Pound. There is the fear that the British economy will go into a "triple dip recession", and as a result a lot of traders are taking their money out of the UK.
However, I believe that as long as the global environment is relatively strong this pair should continue higher over the long run. The question then becomes whether or not we are consolidating before a little bit of a pullback to continue the bearishness in this pair, or are we trying to build a base in order to reach towards the 1.63 level again in a larger consolidation area. For myself, I suspect the latter of the two, but will have to see a close above the 1.59 on the daily chart in order to actually risk money on this opinion.