British Pound Showing Signs of Topping

The intraday trading action is pointing to a lower GBP USD. Fundamentally this market is still weak as a contracting economy andwidening budget deficit are causes of major concern amongst investors.

The intraday trading action is pointing to a lower GBP USD.  Fundamentally this market is still weak as a contracting economy and widening budget deficit are causes of major concern amongst investors.

The current rally isn’t being driven by the U.K. economy but instead on speculation that a U.S. economic recovery will lead to a speedy recovery in the U.K.  If equity markets top then look for the British Pound to rollover to the downside.

Although the GBP USD is poised to close higher, this market couldn’t hold on to the strong gains from early in the European session.  Following a top at 1.4948, the main trend turned down on the hourly chart as this pair took out support at 1.4736. 

The break from 1.4948 to 1.4702 formed a retracement zone at 1.4825 to 1.4854.  The subsequent rally failed at 1.4857.  Based on the developing formation, it looks as if the British Pound is poised to break to the downside.  The key area the market has to get through is 1.4731 to 1.4680 accelerate the move lower.