The GBP/USD pair fell during the course of the session on Wednesday, but found a little bit of support near the 1.5050 handle. With that, it’s likely that the hammer that we are seeing at the end of the day is the beginning of significant support. The 1.50 level below is massively supportive in our opinion, because it is such a large, round, psychologically significant number and has shown massive resistance and support on longer-term charts.
We expect that there will be a lot of buyers in that general vicinity, so if we get some type of work candle below, we would be buyers. On top of that, we have to deal with the Bank of England and its interest-rate decision today, as well as the monetary policy statement which of course is probably more important. We need to see where the Bank of England’s outlook is, and as a result that will have a massive amount of influence on the British pound in general.
Looking at this market, we believe that a bounce to the 1.55 level could happen, but we also recognize that it would be a bit noisy between here and there so it could be a pretty difficult move to that level. However, today is a very important day for the British pound, so we believe that a lot will be revealed. If we did manage break down below the 1.50 handle however, that would be extraordinarily negative for this market.
Because of this, we are going to be very careful and probably wait until the daily close before we place any positions on, or perhaps even wait until after the nonfarm payroll announcement tomorrow. Because of that, the best thing that we can see about this pair is that we are certainly interested in it, and we also recognize that we are at an important level. With that being the case, we are going to be very diligent about our analysis, but to recognize that a buying opportunity very well may present itself in this area finally.