The GBP/USD pair initially tried to rally during the course of the session on Tuesday, but found enough resistance to the 1.56 level to turn things back around and form a shooting star. The shooting star of course is a negative sign, so we think that a pullback may be about to happen. However, there is the 100 day exponential moving average below, as well as the 1.55 level which of course is a large, round, psychologically significant number. On top of that, we have previous support at the 1.55 handle, so we feel that it’s only a matter time before this market finds buyers on any pullback. With that being the case, there is no scenario in which we sell this market currently.
Keep in mind that today features a couple of employment announcements out of the United Kingdom. This of course can move the British pound in general, as the Claimant Counts announcement comes out and the Unemployment Numbers announcement comes out as well. This could cause a bit of volatility but quite frankly this point in time we feel that the market is showing real favor for the British pound as while most currencies have struggled against the US dollar, the British pound has at least held its own for the most part.
There is also a trend line below, which of course is rather supportive as well. Either way, we are simply waiting for some type of supportive candle in order to go long again, but recognize that the 1.57 level above will be massively resistive. We believe that since it’s late in the summer, we will probably continue to bang around in this general vicinity, but it’s only a matter time before he break out to the upside. In fact, we feel that the market will then reach towards the 1.58 level, and then possibly the 1.60 level given enough time. As long as we are above the uptrend line, there really is no way to sell this market as there looks to be quite a bit of support and strength just below current areas.