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The GBP/USD pair tried to rally during the session on Tuesday, but gave back quite a bit of the gains as the 1.64 level offered resistance yet again for the second session in a row. This is now two shooting stars in a row, which of course is a very bearish sign, and now it is possible this pair will pull back.

Nevertheless, traders should recognize the fact that this pullback isn’t necessarily a selling opportunity, rather a well needed pullback after a parabolic move. In fact, this is a buying opportunity given enough time, and not a selling one.

GBP USD December 4 2013 two shooting stars in a row technical chart for currency analysis

The British pound has been strong against most currencies, and quite frankly, it wouldn’t be a surprise to see it weaken against most for the next couple of sessions. After all, no market can go in one direction forever, and it has been overextended to say the least lately.

The Federal Reserve and the FTSE.

Everybody knows that the Federal Reserve is considering tapering. It is going to be almost impossible for the Federal Reserve to taper anytime between now and summer of 2014, but the market still has to take all possibilities into account. On the other hand, the one thing that trader should pay attention to is the FTSE, as it seems to be running basically neck and neck with the British pound itself.

The London index has been extraordinarily strong, but it is starting to fade off a little bit as the overextended parabolic move is starting to run out of steam. The correlation is hard to ignore at the moment. It really comes down to money moving into Great Britain at the moment, and right now it appears that perhaps we are going to take a short break.

Nonetheless, the 1.62 level is the beginning of significant support, and therefore traders should be bullish as we pull down in that area. On the other hand, if it managed to close above the 1.65 handle, assume that this market is on its way to the 1.70 level.

About the Author:  Al Alp Kocak has been trading forex since 2003. He writes technical analysis based on Japanese candlesticks and Ichimoku Kinko Hyo and is a senior educator at  FX Academy, where he provides trading strategies to traders at all levels.