By FX Empire.com
GBP/USD shot up like it was fired out of a cannon on Friday as the Pound absolutely beat up on the Dollar. The pair has been very choppy lately, and the last two days retraced the entire move that happened the three previous days. The area that we are in is consolidation, and at this point in time it still looks solid.
The 1.59 level above is very resistive, and has pushed price down more than once now. The 1.5650 level is supportive, and it is between these two levels that the pair finds itself bouncing around. The levels are solid, and the 1.60 cannot be forgotten just above the 1.59 area. The market looks as if it will be in this area for a while, and as such we are willing to sell on a weak candle in the present area if we get one. We are also willing to drill down to shorter timeframes if needed as the area has been so strong.
The UK is heavily exposed to the European Union as it sends over 40% of its exports to the region. The UK banks are also heavily exposed to the region and its debts. This is a weight upon the British economy, and by extension the Pound. The pair should however continue to grind away, as the Dollar is finding itself weak due to the central banks forcing liquidity into the markets. The commodity trade continues, and it should continue to punish the Dollar overall.
The 1.60 level has to hold for our thesis to continue to be correct, and one would have to think that the area should provide some kind of reaction going forward. However, if the 1.60 level gives way – we could see a real run higher in this pair that could really pick up momentum at that point.
The selling of this pair is preferred, but if 1.60 gives way – we have to go with the bulls at that point in time. Note that any sell position at this point is for a short-term trade, and not a longer one.
GBP/USD Forecast February 27, 2012, Technical Analysis
Originally posted here
