The GBP/USD pair has been extraordinarily volatile recently, as we had broken below the uptrend line that had the British pound strong over the course of the summer. By breaking down below there, it is essentially a trend change from the rally that we had seen for several months. However, you have to look at the charts and recognize that we have been in a downtrend for much longer than that, so quite frankly a break down from here really isn’t that big of a surprise if you look at it from a longer-term perspective.
If we can break down below the lows from the last couple of weeks, I feel that the market will then reach towards the 1.50 level. Ultimately, I think we will reach that area and possibly even lower than that. However, do not forget that the 1.50 level is a massive number in its implications, so it will of course attract a lot of trading.
Selling rallies
I think at this point in time the only way to trade this market is to simply sell rallies. I think short-term rallies will of course offer selling opportunities, but so long-term rallies as long as we can stay below the 1.55 handle then I have no interest whatsoever in going long of this market at the moment, not at least until we get a longer-term signal. I don’t see that happening anytime soon, but of course will reevaluate that towards the end of the month. If we can break below the aforementioned 1.50 level, I feel the market will then more than likely reach towards the 1.45 handle which of course was the low during the month of March.
It really comes down the type of volatility you can handle, but at this point in time I believe that short-term rallies are probably the easiest way to sell this market. I’m not interested in holding onto a trade for any real length of time, simply because I know there’s so much in the way of volatility out there.
