The GBP/USD pair fell during the session on Thursday, showing signs of a possible reversal. However, I do not think that this selloff had anything more to do with a reversal than the simple fact that the nonfarm payroll is today, and traders may be taking risk off of the table as they get concerned about the possibility of the numbers being a bit of a surprise.
After all, the nonfarm payroll numbers tend to be one of the largest market moving events during the month, and with the Federal Reserve looking to possibly make a decision on tapering based upon these numbers, one has to think that a lot of traders will be watching.
That being the case, I think that more than likely will we could see some continued weakness in this pair, but I look at it as a potential buying opportunity. After all, the 1.60 level should be supportive, and I believe that it's the "floor" in this market at the moment, and therefore the closer we get to that level the more interested I get in buying this pair. This would be especially true if we get a supportive candle down near that handle, and although it's 155 pips away, the nonfarm payroll number can move this pair that quick.
On the other hand
On the other hand, it's quite possible that we breakout to the upside. I do not consider this market broken out to the upside though until we get a daily close above the 1.63 level. If we can get above there, I believe that the market is heading straight towards 1.65 handle in relatively short order, and would even consider buying short-term dips in order to build up a relatively large position between here and there.
The 1.65 level course will be resistance based upon the large round psychological effect of a number like that, and the fact that on the longer-term charts it does show signs of resistance anyway. Going forward, I believe that buying dips will be the way to go for the next several hundred pips as the US dollar continues to get beaten up.
