Sometimes trading in shorter-term time frames on a day-to-day basis can be difficult with the markets tending to chop around, leaving much room for doubt and confusion. In these times, we will often take a step back to look at the longer-term charts for a better and clearer indication of direction.
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GBP/USD has been relatively strong over the past couple of days to suggest that we could be once again looking to establish fresh highs beyond 1.6665. However, we contend that the current market rally will stall out ahead of the 2009 highs from the previous week, which are at 1.6665, with the weekly chart still very much supportive of our view.
A closer look at the weekly chart above shows the formation of a very bearish candle in the previous week that resembles a shooting star setup, which is often indicative of topping.
Although we have been trading higher in the current week, the formation would only be negated on a break back above 1.6665. Therefore, any rallies should be viewed as formidable sell opportunities, with the push higher, in our view, only an attempt to establish a lower top below 1.6665 ahead of the next drop.
By Joel Kruger of DailyFX.com
