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The GBP/USD pair initially rose during the session as the announcement of a Spanish bank bailout hit the wires this past weekend. However, as the session continued, the pop that the pair initially saw ended up fizzling out. The cable pair often will follow the risk appetite of the global markets, and as the stock markets rolled over, the pair did as well.
The rout began once the Asian session was closed and the European session was waning. The American stock markets initially popped as well, but the first signals of trouble actually came early as the S&P 500 futures started to roll over a few hours ahead of the New York open. This sign turned out to be true as the US stock markets absolutely fell apart during the session as well.
The candle for the session looks like a shooting star, and the 1.55 level has held as resistance at this point. The market has been in a downtrend for some time now, and this signal will more than likely bring out the bears again in this market as the Pound continues to slip against the US dollar.
The 1.52 level below looks very supportive, and as a result a break below from that area on the daily close would have us shorting this pair aggressively. The breaking of this level would show a massive capitulation by the buyers, and would more than likely lead to another 800 pip fall or so. If the European situation doesn’t change soon, we could very well see this situation happen.
The buying of this pair is very difficult to do as the massive downtrend remains intact, and the global risk scenario dictates that it should be. The situation in Europe is far from being fixed, and this will continue to hamper the British economy as the British send over 40% of their exports into the European Union. The selling of this pair is our move if we break below the lows for the Monday session, and if we see a small pop with another failure of follow through.