DowntownForex

Trade Idea: GBP/USD Limit Sell at 1.6465

By Forex District -

The pair fell sharply as the IMF warned UK on public borrowing and was downbeat on the growth outlook. The IMF said, “the economic downturn heightening the risk of further large credit losses, banks have tightened the supply of credit. The high level of household indebtedness is also likely to constrain the pace of economic recovery.” They predict GDP to fall by 4.25% in 2009, with quarterly growth picking up gradually through 2010. “The speed and strength of the recovery, however, remain highly uncertain, given the unprecedented nature of the crisis and the importance of confidence effects.”

The continued stress over a CIT Group bankruptcy, fear over Indonesia’s bombings, and a cautious stance ahead of more U.S. bank earnings also put pressure on the Sterling.

Looking at the 4hour chart, GBP/USD found strong supply at 1.6470 (38.2% Fib Retracement Level connecting 2.1166 & 1.3547 Approx.) to reach an intraday low at 1.6284. A break below this area would suggest further downside with the next key target at 1.6200, followed by 1.6130 and 1.6032. The bias is neutral to bearish at these levels with preferred strategy to sell on rallies. However, positive results from Citi and Bank of America may weaken the USD on risk appetite flows, thus the Pound rallying against the Dollar.

Resistance is now seen at 1.6413, followed by 1.6470 and 1.6550.

Trading levels in play:

Limit Sell @ 1.6465 Targets: T1 1.6435 – T2 1.6300 Risk 1.6510.
* Good till NY close. After 15 pips profit move stop to entry, take profit at will. Comments will follow if outlook changes.

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