You may recall that I mentioned in one of last week's posts that 1.3845 is the critical level to watch out for on the GBP/USD pair because if it closed below this level on any one day, then this would signal the start of a new down trend. Well this is exactly what has happened because it closed below this level yesterday.
I think this is significant because this is the key Supertrend level on the daily charts. To put it into context the Supertrend was red from October 1 2008 until February 8 2009. It was then bullish for about a month or so until yesterday, when it turned red once again.
Also if you want further confirmation of possible weakness in this pair, the latest signals on Marketclub have all been sell signals. This includes the daily, weekly, monthly and quarterly charts, with the latest signal coming on the daily charts yesterday with a sell signal at 1.4035.
Anyway the negative Supertrend means that I will automatically be looking for short positions on the 4 hour chart for this pair, but on a longer term basis I wouldn't be at all surprised to see a sustained fall from now on to around the 1.30 level. It's bounced back a little bit today but this rise is far from convincing and I personally think that further falls are inevitable.
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