The GBP/USD pair initially fell during the Wednesday session, but turned around to form a massive bullish move. The fact that we did that and broke above the 1.29 level is a very bullish sign. We have pulled back from their later in the day, but with this type of impulsive move I have a hard time believing that there won’t be any follow-through. Because of this, the market will then go looking for the 1.30 level, and perhaps even higher than that. The British pound has been oversold recently, as there are a lot of concerns when it comes to the British elections. However, the British pound has shown itself to be rather resilient, and I don’t see anything to suggest it is going to change that attitude anytime soon. The absolute “floor” in this market is the 1.2750 level, so it’s not until we break down below there that I would be interested in selling this market as it was such a significant resistance barrier previously.
The move during the session on Wednesday was massive, and in a sense parabolic. Because of this, I believe that there is real tenacity to the buying, but I would like to see some type of pullback to take advantage of this move, and would not like to try and “pay up” for the privilege of owning the British pound. Ultimately, this is a market that should continue to see buyers and I believe longer-term will continue to fight towards the upside. The move will only be exacerbated if the conservatives take a clean sweep in the elections coming out of the United Kingdom. Expect volatility, but I still favor the upside going forward and therefore think that small positions are probably going to be the easiest way to play this market.
Written by FX Empire