GBP/USD rose during the session on Thursday, and acted like it was shot out of a cannon. The pair has recently pulled back, but the bullish action for the session will have many of the bears running. The 1.58 area is where we are approaching at the end of the day, and it could be a place in which we could see serious resistance. However, it must be noted that the candle is closing at the very top, and this is almost always a sign that the surge could continue.
The pair continues to react to headlines out of Europe, and the ECB announcing that it was going to swap bonds with the Greeks over the weekend got the markets full of hopium again. The pair of course reacted very violently, but the fact that we are now in the middle of the resistance area, and the sudden move up combined with that has us wondering if this is just yet another spike in a violent marketplace.
The pair will be difficult to buy at this point as the resistance seems to be strong all the way up to 1.60 or so. The area has sent the market lower before, so being careful is probably the way to go at this point in time. As a result - we are not willing to buy into this resistance.
The area would however, make a really good spot to sell from as the market will probably come to grips with the idea that the reaction was a bit overdone. The situation in Europe is far from being over, and it will only take a short amount of time before the markets realize that this is so. The problems in Europe are very complex, and it seems that every time we get a bit of good news, the market s will then focus on the next fire to put out. This is the way it has been for months, and will more than likely continue to be so.
The selling of this pair is what we feel is the correct way to go, but it might be a day or two before we get the weak candle that we are looking for. The Dollar is bought every time there is bad news, which seems to be about every 2 - 3 days.
GBP/USD Forecast February 17, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3