The GBP/USD pair broke above the 1.55 handle during the session on Monday, an area that I considered very important for this currency pair. However, as you can see on the chart the market failed to stay above there for any significant close, and as a result I believe that the sellers have stepped in at an area that looked a very obvious for resistance to appear.
With that being said, the shooting star looks very interesting, and as a result I think a pullback is more than likely coming. The top of the shooting star is at the top of the channel that the markets have been trading and since March, and as a result it could be another reason to think that a pullback is coming.
At the same time, the British pound failed to break down below the 0.84 handle against the Euro, another area of significant resistance against the value of the Pound. Because of this, it appears that the British pound in general will run into a bit of trouble at these levels, and perhaps a little bit of profit taking is due.
Resistance
This area looks very resistant to me, and as a result I am fairly confident in the bearishness that will form the next couple of days. However, if we managed to break the top of this resistance candle that would of course be very bullish sign. A break of the highest from the Monday candle suggests to me that this market would go much, much higher. This should coincide with a breakdown of the 0.84 handle against the Euro so. If it does not, I think that the term "false breakout" could be introduced and everybody's vocabulary in the short term.
A lot of the strength that we have seen in the British pound lately has been due to the fact that the United Kingdom managed to avoid a "triple dip recession." However, there still a lot of economic headwinds to the UK, and as a result this knee-jerk reaction higher was probably a bit overdone for the time being.
