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The GBP/USD pair slammed directly into the 1.57 resistance area during the session on Thursday, and one of the most exaggerated moves we've seen in a while. With the head of the European central bank stating on Thursday that they were willing to do whatever it took to keep the Euro alive, the markets went off the deep end. The real question will be whether or not this was a true buying frenzy, or simply a short covering rally. At this point in time it appears that if we had to make a decision, we would suggest the latter of the two.
We think this is a perfect place to begin shorting this pair again. However, we need to see whether or not we get the resistive candle that we are looking for, perhaps on the four-hour chart. If you're more aggressive, you could go ahead and short at the 1.57 handle, knowing that if we run is another 100 pips you have to get out.
With this being said, we are still relatively bearish of this pair, and think that the errant comments of a central banker in Belgium have very little to do with what will happen in the long run. Why frankly, Mr. Draghi gave a nice daily, but nothing in the realm of facts. This is been a reoccurring theme at the European central bank, and one that keeps continually disappointing markets. With this being said, we are willing to take the risk of a short.