By: DailyForex.com
The GBP/USD pair fell during the balance of the session on Monday, but as you can see the 1.50 level brought in the buyers, and has provided enough support in order to form a hammer for the session. Because of this, it's very likely that this market will more than likely bounce from this area, but I see a lot of resistance at the 1.5250 handle. Because of that, I think that this is a short-term buying opportunity at best.
However, we have not broken above the top of that hammer yet, so we can't say that is a buy signal. It looks like it's formed on the 1.51 handle, so we have a nice clean "handle" to use as a marker. The 1.5250 level has been rather resistive in the past, and I don't expect it to be any different going forward. So having said that, I think this is going to be a short-term opportunity and countered trend at that.
Several opportunities for several time frames
There is the short-term opportunities that I presented, but there are also longer-term ones waiting happen. I think that the more conservative trader can simply sit back and wait to see the market react to the 1.5250 level as resistance, and then perhaps start selling. On the other hand, if you managed to give the market down below the 1.50 handle, that would break the back of support and I believe that this market really would start to pick up steam to the downside.
It really comes down to your risk tolerance. Without a doubt, at this moment in time shorting this market is going to be "safer" than buying. After all the trend in lately has been very negative, and that being the case there is plenty of momentum on the way down. As far as buying is concerned, it's really difficult to do for anything more than a short-term trade. If we did get above the 1.53 level on a daily close though, at that point time I would think that the momentum is starting to pick back up for the buyers.
