Both the GBPUSD & GBPJPY look to start the trading week pointed lower with the short term trends for both the daily and weekly charts now down. While GBPJPY appears a bit of a wild card because of the G-7 commitment to supporting USDJPY, thus adding a definite uncertainty to the short leg of GBPJPY, aka The Dragon, GBPUSD is warming up to be a likely short play with the U.S. Fed now joining the BOE — Bank of England – in telegraphing the end of easing strategies going forward.

GBPUSD had enjoyed a healthy bid against the Greenback given the BOE’s tough talk of tightening, while the U.S. Federal Reserve was sticking to the company line of a continued low interest policy thru June. With several Fed officials now opening the door to a post QE – quantitative easing – environment the U.S. Dollar quickly responded with a strong uptick last Friday leaving GBPUSD to close below its 3-month bull trendline and shift the short-term weekly trend lower. Traders will likely be more emboldened in selling rallies and otherwise taking sell signals in GBPUSD in a technical environment where both the weekly and daily trends are bearish. Despite the current sharp momentum lower for the GBPUSD, potential support just below 160.00 level would need to be penetrated to shift the intermediate trend on the daily chart above lower.

Jay Norris is host of Live Market Exercise at www.Clovernest.com and the author of Mastering the Currency Market, McGraw-Hill, 2009.