The GBP/USD pair initially rose during the session on Thursday, as we accelerated the uptrend to reach above the 1.6150 level. However, by the end of the session we saw a significant pullback and a loss of the gains in a very short order.
This resulting candle is a shooting star, and it has a definite area around the 1.6150 level that is showing serious resistance lately. With this being said, I think that weakness is starting to creep into this currency pair, although longer-term I am definitely positive on it.
Looking forward, we have the nonfarm payroll numbers coming out later today, and it will certainly have an effect on not only this pair but the entirety of the Forex markets. This particular jobs number will be critical as it could also be one of the last things that voters see in the United States before picking their next President. Because of this, it is very possible that this move may be a little bit exaggerated.
Shooting star
One of my favorite very signs without a doubt is the shooting star. When you line it up with significant resistance like we've seen, it sets up for a nice sell signal. However, I don't necessarily think that this is the beginning of some kind of massive meltdown. In fact, I think this will eventually be seen as an opportunity to buy the British pound while it is "on sale."
As long as the central banks are diametrically opposed in their opinion on further monetary easing, the United States will lose out to the United Kingdom. The Federal Reserve is hell-bent on expanding its monetary easing, and has even put in "unlimited timeline" on how long they will continue to expand their balance sheet. This is essentially making up US dollars out of thin air, and launching them into the economy.
I believe that this pullback that looks likely to happen will more than likely be short term in nature. On the first signs of support, I would not hesitate to start buying the Pound again. In the meantime, I would sell a break of the lows of the shooting star for a short-term gain.