The GBP/USD pair rose during the session on Tuesday as the Federal Reserve suggested that the economy is getting slightly better in the United States. However, there was no mention of quantitative easing, and because of this, there has been a snap back to the US dollar. The area above current levels is a massive consolidation zone, and this could serve as resistance going forward.
With all of this in mind, we will use the candle from Tuesday as our guide. If we can break higher we are willing to buy this pair for a return to the top of the recent consolidation area at the 1.59 level. The candle did in fact break higher than the candle from yesterday, which could have been a signal to buy, but the fact that it didn't close above that range negates the signal. This chart is a perfect example of why we wait until the daily close.
The selling of this pair is our move if there is a breakdown to below the bottom of the Monday session range, as it would show a continuation of the weakness in the pair. The Dollar may receive a bid as the central bank looks a bit less dovish than many of its counterparts. This could introduce a world of higher stock prices in congruence with a higher Dollar. (At least in the USA.) With this in mind, we are simply going to trade in the direction of the next breakout/breakdown on a daily close outside of the Monday range.
Going higher, we suspect that the market would run into trouble at the 1.58 level. Because of this, if we end up long of this market, we will be very careful at that point in time not to give up too much profit on our trade. If we end up trading lower, we expect the 1.55 level to offer support as it is a major round number. However, the level has been broken through several times, so we see even more support at the 1.53 level below it.
GBP/USD Forecast March 14, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3