GBP/USD fell on Monday, but managed a bounce late in trading to form a hammer. The 1.57 level is looking supportive at this point, and it appears that the market may want to make a run at the 1.58 level now. The area has been resistive, and it should continue to be. However, if we get a daily close above that level – it would be a massively bullish sign.
On the flip side of that trade, a breaking below the low of the hammer form Monday is a bearish signal as it shows it to be a “hanging man”. The breaking below this level would signal the market’s willingness to come back and retest the 1.55 level for support. The pair has been very bullish lately, and the move has been fairly parabolic. Because of this, we would be aggressive on the confirmed hanging man to the sell side. As far as buying – we need to see a daily close above 1.58 to consider it.