The chart above is on a weekly scale and shows the resistance zone I am referring to. The chart below is a daily chart with a fib retracement. A top seems to be forming around 1.625, and if you look closely, you can actually see the crossing of the Tenkan and Kijun lines of the Ichimoku cloud (bearish sign).
While its best to see a little bit of follow through to the downside before shutting the door and calling this a bearish reversal, i'm going to add slightly to my current short position now. The reasoning is simple, any time significant technical resistance aligns with fundamental directional reasoning, the situation is unmistakably +EV. If it confirms to the downside I may add again.... go big or go home right. It wouldn't be unexpected for the pair to go up and bump that 1.625 to 1.630 ceiling a bit, but I highly doubt we will break through it entirely. The longer this pair remains directionless, the more I believe it will begin to favor the downside as we approach further tapering expectations from the fed and more accommodating banking policies from the BoE and a maintained asset purchase program.
What about the other fundamental drivers you say?? Take your NFP number and your quarterly GDP and throw them in the toilet. These numbers cause market reactions only because they have influence over the fed's monetary policy.... but these numbers are manipulated and watered down at best. Fed policy is all that matters right now.... Imagine an old rope that has been taped back together so many times that none of the original rope exists anymore, only tape. The tape is the feds monetary policy, its been forced into a corner and only has one way that it can go.
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