The GBP/USD pair had a strong showing on Monday, as the 1.6050 level got broken to the upside. This shows that the hammer that we formed during the Wednesday session of last week was no fluke and that there is a significant amount of support for the cable pair in this general vicinity.
Looking forward, we still expect to see a 1.6 to print before too awfully long. We are long of this pair right now, and do suggests that we will revisit the highs of the most recent leg which was 1.63 or so. Once we get to that area, we could run into significant resistance, but we still believe this pair will march higher. We still believe in a 1.7 print for the year 2013 some time, and are trading this pair as such. We buy on dips, and certainly will buy on breakouts as they come.
If we get bad news out of the fiscal talks going on in the United States, it is likely that this pair will fall, but we believe that will be a temporary situation. In fact, it will more than likely invite buying as it would have the British pound “on sale.” Because of this, we are actually looking forward to any bad news that will give us an opportunity to buy the Pound at a cheaper rate.
On pullbacks, we are buying this pair, and will use short-term charts to identify those opportunities. This is because we have a “buying only” rating on this currency pair right now as long as we are above the 1.58 level. The reason the 1.58 level is important is that it was the level we broke out of in order to confirm an ascending triangle over the summer. During that move, we managed to reach the 1.63 level which was our projected target based upon the height of the triangle.
Since then, we have pullback and retest of the 1.58 handle and it has offered support. Because of this, this is like an “on/off switch” for us. As long as we are above 1.58, we will only buy this pair.
Written by FX Empire