By: Christopher Lewis
GBP/USD rose again on Thursday as the mania continues. The UK even came out with negative GDP numbers the other day, but the Fed had to trump them by promising low rates through 2014. Because of this, the fall that we saw in the Pound was quickly reversed.
However, with the deteriorating UK economy, sooner or later bad news will catch up with the Pound. The UK is simply far too exposed to the European Union in order to think they will emerge form that mess unscathed as well. The UK banks are knee-deep in debt from that region, and the UK sends over 40% of its exports to the area as well. None of this should exactly inspire confidence in the British economy.
The austerity measures in Britain are to be commended, but they will work against growth for the time being. In the long run, this is good – but we won’t see the benefits for some time. The British are probably going to be quite slow for a spell.
Moving Averages and Astral Bodies
The pair did rise for Thursday, but it showed real weakness in the later hours of the session. This produced a shooting star candle at the top of the recent parabolic move, and it certainly would make sense that the pair would pullback given the massive move we have seen over the last several sessions.
The 100 day EMA (shown in red) is in the area, and the 200 is just above, at the 1.58 handle. The 1.57 level is the start of recent resistance, and to think this pair was going to slice through the area right away would have been wishful thinking at best. The pair tested this area several times in November and December, and never got through.
With this candle, I know I cannot buy at this point. (Risk to reward would be horrible anyway.) However, on a brake of the Thursday lows, I wouldn’t hesitate to sell this pair as selling is with the trend, and there is precedence for this pair to fall from here. I cannot buy until we get a daily close above the 1.58 handle.
