As the pound recoils off old support, a sign of resistance may be an excellent selling opportunity. Since coming off of the 1.435-1.4375 support area last Monday, the pound went below the next support level at 1.368 and went as low as 1.35006 to the lowest level since the start of the 21st century. Since then however the pair has seen better days with the pound appreciating back to old support in a matter of days. The major move can be attributed to positive news on both sides of the ocean. Relatively positive news from Barclay's and US political action surrounding a stimulus package of epic proportions and a possible good bank-bad bank plan has sent risk appetite higher. Despite the fundamental opportunities, the picture is not entirely clear as the stimulus package may see difficulties in the US Senate despite expectations of getting easily passed in the House today.

Having come off its highs, and erasing the previous three hours of gains with a large red candlestick, a play on the short side is advisable with a tight stop not far above 1.4375. Should the pair break higher, downside risk would have to be reconsidered and in the near-term a move higher could send the pair towards 1.45.