The GBP/USD pair fell during the majority of the session on Wednesday, but as you can see bounced hard enough off the 1.66 level to form a nice-looking hammer. This hammer is at the bottom of the reason consolidation area, so we feel that this pair more than likely is ready to spring higher. While we would necessarily call this a massive buying opportunity, it is good enough and stable enough for us to consider going long. We think the market will ultimately go to the 1.6750 area or so before running into significant resistance. The real battle starts up there, and if we can get above there, we feel that this market could take off to the 1.70 level.
The British pound continues to do fairly well against most currencies, with perhaps the exception being the Swiss franc. However, the US dollar is somewhat strong at the same time as well, so perhaps trading the British pound against some of the more riskier currencies might be the way to go as the US dollar of course is going to have a little bit of a bid in it and somewhat uncertain times.
Going forward, we expect the 1.70 level to be massive resistance, and we do not anticipate that the market will go much higher than there anytime soon. In fact, we believe that the move to that area will probably be choppy enough to get a lot of people in and out of the market from time to time. We also believe that the 1.65 level below is massive support, so we think that the market won’t collapse below there anytime soon. In fact, the closer we get to the 1.65 level, the more interested we are in going long of this market.
Selling is not a possibility at this point, although we do like the US dollar in general. The British pound is seems to be one of the better performing currencies overall, and therefore it’s not a good match to sell against the greenback. Ultimately though, we think this pair goes higher, albeit slowly.