The GBP/USD pair fell rather sharply on Tuesday, after initially trying to rally and get above the 1.58 level. What I found most interesting is that for the first time on a rally, we could not clear the handle. This to me suggests that there is significant selling pressure, and that the 1.58 level could very well become a resistance area going forward. If that's the case, this could spell bad news for the British pound.
However, the one thing that I must say that would temper all of the enthusiasm to sell this pair is the fact that we are now entering the area that made up the ascending triangle from last summer that shot this pair up to the 1.63 handle in the first place. Because of this, I believe that although it looks like we’re going to continue falling; it will be choppy on the way down.
There are fears of a "triple dip recession" in the United Kingdom, and the incoming head of the Bank of England, Mark Carney, has already suggested that he was going to expand the monetary policy. While he doesn't come to London for a couple months, the market has decided to jump out in front of it.
New lows
Looking at this chart, the Tuesday candle did of course make a new low, and because of this we think that the bearish pressure is starting to pick up. Not only to the 1.58 hold off the buyers, but the fact that we got a lower print at the end of the day definitely suggests that we are going to see more selling. This is ironic, considering that most charts right now look very anti-Dollar.
Because of this, I do believe that the British pound is in trouble. If you look at it against the Euro as well, it looks horrible. I would be willing to start selling this pair on short term charts that show hints of weakness, but also will have to be willing to write out of volatility on the way down. After all, this will not be a quick move at all times.