The GBP/USD pair shot straight up for the session on Tuesday as we suggested that it could, but the pair also stopped at the 1.59 level that we also suggested in yesterday's video as well. The pair has been parabolic, and a pullback could be coming fairly soon. Regardless, we are not willing to buy at this lofty area, and as a result will need to see the pullback in order to go long. The area around the 1.59 handle starts another resistive patch, and buying into resistance in a pair that has already gone a bit too far too fast isn't our way of trading.
The UK is highly exposed to the European Union, and with the rumors of a Greek agreement circulating around the markets, the pair got a boost as the Dollar got sold off. However, at the end of the session we saw no real announcement, and the Greek lawmakers postponed their meeting that was supposed to be used to sign this agreement into law. No matter what happens, one can certainly appreciate the fact that the market wants to rally on any hint of an agreement, even if it has been burnt several times before.
The pair is looking to break into the consolidation area above, but it is going to be hard to buy this market right now as it is so overbought. Yes, it certainly can continue much higher in theory, but the chart isn't as clean as some others out there. Because of this, we aren't buying, but would looking for pullbacks to the 1.57 level, and perhaps even the 1.56 level. The areas could provide enough support to see a nice hammer or engulfing green candle in which to base our long trade above. If we break to a sub-1.56 level, it would violate two hammers, and this would be more than enough to convince us that the trend is moving back to the downside again. There are going to be plenty of chances to see bad headlines come out, so while this pair has been a one-way trade lately - this could change in a flash.
GBP/USD Forecast February 8, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3