GBP/USD fell during the Wednesday session as the Dollar got a bit of relief from the massive selling it has seen over the last several days. The Europeans still haven't come together with some kind of agreement concerning the Greek debt crisis. The markets may have already priced an agreement in, and any failure would certainly bring risk related pairs down like the cable.
The 1.59 level proved to be resistive as we stated yesterday, and the market pulled back to the 1.58 level, which is support. The market still looks bullish, and the idea of some type of consolidation in this neighborhood isn't that hard to imagine. The UK is highly tied to the European issues though, and if they don't get worked out soon - this pair will plummet as the world will almost undoubtedly run to the US dollar.
The United Kingdom's economic numbers have been a bit stronger lately, and as long as the EU doesn't implode, it is possible that the markets believe the Pound may have been oversold. The move recent has been fairly parabolic though, and it is hard to get in to the long side at these lofty levels. There really hasn't been much of a pullback, and this would make most traders nervous. At this point, one would have to think that the risks are probably higher on the downside as there has been such a massive surge upwards.
The situation in Europe will continue to drive what happens in this pair, and as a result it is a bit risky at the moment. The real test will be what happens after the announcement that the world has been waiting for. The market may have priced in good news out of Europe, and if that is the case - the truth about this pair will show itself afterwards.
We presently don't want to sell, but think the market is a bit too lofty to buy. On a break below the 1.57 level, it looks as if the pair would return to the downtrend, but until that happens - we don't see much of a selling opportunity. A daily close post-1.60 is needed in order to buy.
GBP/USD Forecast February 9, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3