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The British Pound is still trying to form a top against the US Dollar, with a Bearish Engulfing candlestick pattern below resistance at 1.6742, the February 14 close, arguing in favor of a turn downward. Near-term support is at 1.6593, the 23.6% Fibonacci retracement. A break below this boundary targets the 38.2% level at 1.6452. Alternatively, a reversal above 1.6742 exposes the 23.6% Fib expansion at 1.6811.
We opted not to enter a short trade yesterday on risk/reward grounds but a pullback has opened an opportunity. We will enter short here, initially targeting 1.6593. A stop-loss will be activated on a daily close above 1.6822, the February 17 high.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com