The GBP/USD pair has been in a massive free fall for the last several weeks. It seems like every time the Pound tries the gain some type of putting, the market slaps it back down. With that being said, there has to be a point in time where the support finally comes back into the marketplace. One of the most obvious spots would be the 1.50 level, however we are starting to see a market that looks like it's ready to go much lower.
When I look at this chart, I recognize the fact that we fell again during the Friday session, but found the 1.502 level to stay underneath. The truth is though that the only thing that saved this pair was the fact that it was Friday afternoon, and most traders wouldn't want to be carrying any risk into the weekend. With that being said, when you look at the longer-term charts, you could see the real story as far as I can see it.
Weekly shooting star
Looking at the weekly candle, it is a shooting star and it does suggest that further weakness is coming. After all, one of my favorite trades is a "continuation shooting star", which is essentially a shooting star at the bottom of a big down move. What this suggests is that the buyers have stepped into the marketplace, but did not have enough conviction or power to make the gains stick. If you think about it, this is a very powerful piece of information as we now have buyers that are losing their money again.
When the buyers stepped into the marketplace and start losing again, you can feel fairly assured that a lot of those buyers would have been people losing money at higher altitudes as well. In other words, this is the first time they've lost in this trade. This makes them "gun shy", and as a result they will be quick to dump this trade. Therefore, if we move below the 1.4950 handle, I am going to start selling this pair again. Otherwise, on a rally I am looking to fade anything that looks remotely like resistance.