The GBP/USD pair fell for much of the Wednesday session as the Dollar continued to gain against most other currencies. The Pound of course wasn’t any different, and this saw the bears take control for most of the day. However, at the end, we did in fact see a bit of a bounce from the lows in order to form a hammer.
The 1.58 level held as support, and as a result we had a bounce from that level. The 200 day EMA is just below the hammer, so we think this is a natural place for longer-term traders to get involved. The hammer looks as if the market wants to try and break higher and retest the 1.60 resistance area.
The British Pound has been impressive lately; especially considering it is so exposed to the European Union. The troubles in Europe could of course come to punish this pair later, but it must be said that the trend looks healthy at this point in time.
If the market can break above the top of the hammer for the Wednesday session, it would fire off buy signals for us, and we would be looking to get to new highs. We can’t help but notice that the 200 day EMA is starting to turn upwards ever so slightly, and this could be a signal that we are starting to gain a bit of steam for the bulls now. The hammer really couldn’t have been placed in a better spot, and as a result we are most certainly interested in this pair from the long side.
On the reverse side of that trade is the ability to sell on a break below the tail of the hammer. If we get below that, it would signal weakness, but we wouldn’t sell until we cleared the 1.58 level as well. With this in mind, it is very likely that we will get a signal, but the Non-Farm Payroll number on Friday could be the biggest influencing factor in the near term. Because of this, we think this pair is poised for a significant move soon.
Written by FX Empire