By: DailyForex.com
The GBP/USD pair fell rather precipitously during the session on Wednesday, as the market continues to selloff. That being the case, this is simply an extension of the downtrend that we've seen recently, and a break of the uptrend line really started the acceleration to the downside. However, this market would have undoubtedly been pushed over a cliff due to the fact that the Federal Reserve Chairman Ben Bernanke testified in front of the U.S. Congress on Wednesday, suggesting that perhaps monetary policy could be changed sooner than anticipated.
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By tightening monetary policy quicker than the market had anticipated, this of course drove money into the US dollar, and out of the British pound. This market had already been bearish to begin with, and I have suggested recently that the 1.50 level would be targeted. That is essentially what happened during the session on Wednesday, so now there are some real questions to ask.
1.50 - will it hold or not?
Right now, I believe that the only thing to worry about in this particular pair is whether or not the 1.50 level will continue to hold a support. If we get a bit of a bounce here, I suspect that we will see selling above, and I will be looking for some type of resistive candle to start selling, especially the closer we get to the 1.5250 handle. On the other a, if we managed to close on the daily chart below the 1.50 level, I would become aggressively short as well. I believe that the US dollar strength is going to continue based upon the US Dollar Index, and as a result I think we have further to go in this market.
The market will focus on whether or not we can pick up enough momentum to the downside in order to break the support level. If we can't, I truly believe that the market will simply back up and try to break it down again. There's simply no reason for this pair to go higher at the moment, although of course anything is possible.