The GBPUSD pair initially tried to rally during the course of the day on Friday but turned right back around to form a shooting star. The shooting star sitting just below the 1.32 level suggests that we could see more selling.

I believe a break below the shooting star should send this market looking towards the 1.30 level in the short term. I do believe that this market breaks down over the longer-term, and that the Forex markets are not done punishing the British pound for voting to leave the European Union. With this being the case, I also believe that short-term rallies will offer exhaustive candles that you can start selling yet again.

I think that the 1.28 level below is the target over the longer-term, and if we can break down below there, we will more than likely try to reach down to the 1.25 handle. Longer-term traders tend to focus on large, round, psychologically significant numbers, so the 1.250 makes a lot of sense at this point in time. I also recognize that the 1.35 level above is massively resistive, so it’s not until we can break above there that I would even remotely consider buying this pair for any real length of time. Because of this, this is essentially a “sell only” market right now, and one has to wonder whether or not we wouldn’t have continued to go lower if it weren’t for the illiquidity of the summer months?

Because of this, I think the first couple of weeks during the month of September will be vital for this pair. If we do not break above the 1.35 handle for any real length of time, I think that signals that the next leg of the move is about to come. I don’t see any reason why this market would rally significantly, even though we are starting to see that perhaps the Federal Reserve will be able to raise interest rates this year. Quite frankly, the problems that could potentially arise from the United Kingdom leaving the European Union far outweigh interest rate expectations.

Editor’s Note: Equity investors/traders can use the Currency Shares British Pound Sterling Trust (FXB, quote) ETF to take positions in the yen without a FOREX account.  The ETF looks to track the price of the British Pound Sterling (GBPUSD), minus ETF fee. The fund seeks to reflect the price of the British Pound Sterling (GBPUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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