The GBP/USD pair rose on Friday only to turn around in the end. The pair formed a shooting star at the 1.58 level, and although we have seen a nice pushback from the bulls, this latest candle seems to confirm what the weekly candle form last week showed: Serious resistance in this area, and no lack of sellers willing to step in and put their money into the market.
The British economy is highly exposed to the European Union, and as a result it could get hit rather hard if the EU falls apart economically in the future. This will without a doubt put a little bit of fear into owning the pound, and as a result it will find doubters no matter what.
The level is the 61.8% Fibonacci retracement level from the most recent bear trend in this pair, and the 1.58 level seemingly continues to be important in this market. The Pound is also being weighed down a bit because of austerity in the UK. The inability of global markets to stabilize will also continue to offer support for the US Treasury market, and this in turn will offer support for the US dollar.
The trend is still down, and has been for some time. The recent action has been very parabolic and bullish, but these types of moves are very difficult to keep moving, especially when the overall market is down. Because of this, we are suspicious of moves to the upside in this pair until we see the 1.60 level broken to the upside on a daily close.
The lowering of price will be tested as we approach the recent lows at the mid-1.56 handle, and if that level gives we could see real acceleration of the down trend at that point. The 1.55 and 1.53 levels will also come into play, and could offer support. If the 1.53 level gives way - this pair could very well end up around the 1.40 handle, and this would have the market selling off the Pound en masse. With this in mind, we simply must bet on the downside at the moment as the obstacles seem less impressive.
GBP/USD Forecast February 20, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3