The GBP/USD pair had a back and forth session on Friday as the Non-Farm Payroll report came out much stronger than expected. This kind of market isn’t all that uncommon on these days, and as a result most traders probably stepped away.
The Pound still looks strong though, and the move has been nothing short of astonishing. The pair has shot straight up over the last month, and is about 600 pips above where the rally started in just this short time. Certainly the pair is overbought at this point, but the reality is that it takes a lot of fortitude to short it from here.
The 1.58 level held as support at the end of the session, and this is probably the most important part of the candle that formed for the session. Sure, it was a massive long-legged doji that could be telling on a breakout, but the fact that the big figure held shows just how resilient this pair really is at the point.
The 1.59 level just above is going to be resistive, and the 1.60 level above that will as well due to the large round number being a psychologically significant part of technical analysis. However, selling is very difficult to do because the trend has been so bullish lately, and on top of that so aggressively so. The selling of cable will take a specific trigger in order for it to make sense.
The hammer than formed on Monday was confirmation of a move above the 1.57 level, and a pullback to find support. We didn’t go long at that point because the 1.58 was just above. The rally has been a hard one to participate in, and as we are at such lofty levels, it is going to be difficult to join in at present. The above mentioned hammer needs to give way in order to sell this overbought market, otherwise – we have no trade until post- 1.61 or so. The selling of this pair should make sense, as the UK is so heavily exposed to the European Union, but as you know, the markets will do what they want.
Written by FX Empire