The GBP/USD pair rose during the session as the “risk on trade came back into play. The 200 day simple moving average continues to offer support, and the candle for the Wednesday session is a hammer. This pair looks more and more impressive as we go along during the last several sessions, and as a result we are currently long of this market.
With the Israelis and Hamas agreeing to a cease-fire, more risk appetite into the market on Wednesday as fears of a larger Middle Eastern war dissipated. We should also note that we bounced from roughly the 50% retrace on the rally from last summer and this of course sets up for a nice long-term trade. With all this being said, we think this market looks very healthy and likely to continue much higher.
We see the 1.60 level as resistance, but not major resistance. In fact, we think this may cause a pullback which should be bought. Unless something drastic changes around the world, we think this market should continue to be one of the better performers over time.
Our “line in the sand” is the 1.57 level. We think that the 1.58 level was essentially a top to the larger support area the goes down to the 1.57 area. Because of this, we think that the odds of any pullbacks offering yet another bounce are extremely high, and until we get below the 1.57 level, we have no interest in shorting this pair whatsoever.
The 200 day moving average is one that a lot of longer-term traders follow. Because of this, we think that real money is starting to move into the market for a potential long-term buy-and-hold situation. With that being said, of course we want to be involved and long of this market. As long as we do not go over to the so-called “fiscal cliff” in the United States, there is a high probability that this pair will continue to grind to the recent highs at the 1.63 level. If we managed to break down, we could go much, much lower. This would more than likely be predicated upon a negative headline.
Written by FX Empire