GBP/USD had an extraordinary couple of sessions this previous week as the buyers stepped into the market in full force. The 1.53 level was absolutely vital to keep any semblance of a bullish run intact since the lows in 2010, and the buyers were up to the challenge. However, it can’t be denied that we fell hard recently.
Although this chart looks very weak overall, it must be noted that this candle was very strong, and shows real conviction at these lower levels. The 1.53 level will have to be closed below to pick up significant bearish pressure, and this simply couldn’t be done during the previous week. The 1.55 level was resistance for sure, but this area was smashed through for the week in fairly short order. The strength of the move was pretty impressive to be honest.
The next significant resistance area above is the 1.58 level, and we will more than likely see this pair head in that direction. If you look a few weeks back, you can see massive selling coming into the market every time the pair approached that area. There is no reason to think this time will be any different.
By the looks of this chart, it is somewhat difficult to be long of this pair on the longer time frames. However, by being patient and waiting until 1.5750 or so, there is a really good chance you will be able to short this pair again as it continues to go back and forth. After all, the problems that plague the British economy have hardly been fixed. Until then, it is difficult to think that this pair will continue higher over the long run. A daily close above the 1.58 level would change that line of thinking for us, but until then, we are simply going to wait for weakness form which to sell.
The 1.5850 level may not produce a “weekly signal”, so if you are interested in selling at that point, you may have to do so off of the daily charts, and use the weekly chart as your guideline.