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The GBP/USD currency pair had a horrible day on Monday as the market closed down towards the bottom of the range. However, we do see the 1.60 level just below as being very supportive. In fact, the fact that it is such a large "round and psychological" number, we think that eventually money will come back to this market.
The British pound is currently one of our favorite currencies, mainly because the Bank of England is sitting still with its monetary policy. Contrast this with the Federal Reserve, which of course is easing and expanding their monetary policy. Because of this, we think this pair over the long term will have an upward bias, and do look to buy it once we get the chance.
We also see the 1.58 level below as significant support too, and as such we are looking for any type of supportive candle in that general vicinity to buy this market. In fact, we do recognize the fact that this currency pair looks more vulnerable at the moment, but we look at this is simply a chance to buy the British pound on the cheap.
We do recognize that many of the risk assets out there do look vulnerable at this moment in time as well and as such we could be waiting for or buy signal. However, this is exactly how we make our money, we wait. This could be an excellent set up waiting to happen, but we need to be patient enough in order to see one of these levels trigger fresh new buying.
As for selling this currency pair, we have absolutely no designs on doing so at this moment. However, if we did manage to break down well below the 1.57 level on a daily close, we would have to admit that the momentum has completely changed in selling would be the way to go. This looks very unlikely however, as the Federal Reserve does such a good job of expanding its balance sheet in times like this. Going forward, we will look for hammers, bullish engulfing candles, and other such signs of life in order to start buying this pair again.