GBP/USD Forecast April 20, 2012, Technical Analysis

The GBP/USD pair had a positive day on the session for Thursday as the Pound continues to gain after the Bank of England has suggested that the economy will not require further easing. The 1.60 level has been broken, and the highs were as well. Because of this, the pair looks as if it is trying to break out yet again.

The pair is risk sensitive, which makes this move even more impressive as the stock markets tanked for the session, while this pair shot straight up. The 200 day EMA has held as support, and the 1.60 should now act as support as well. The levels that the market is approaching have a lot of “noise” in them, so the move higher will more than likely be a choppy affair, not a straight shot higher.

The next logical step is to try and find the 1.65 level as it is the next major round figure, and the markets are certainly showing signs of real momentum as it grinds higher against a massive downtrend over the last several years. On top of all of this, the pair pays a positive swap, and with the Federal Reserve very unlikely to raise rates anytime soon, it should continue to.

Many traders that are reading this analysis will not have been around back when carry trading was common, and this was one of the better pairs at one point to buy as that was something most traders did. The simple idea is that over time, the currency that pays a positive swap will continue to rise over time against the weaker one. When you have this working in your favor, there is enough time gone by you can buffer any potential losses by the interest you have been collecting. It is through this type of trading that people we were able to hang onto some of these positions for months and even years.

With all of this in mind, we are looking to buy on pullbacks and hanging on as long as we can stay above the 1.59 level. Selling isn’t even a thought at the moment.

GBP/USD Forecast April 20, 2012, Technical Analysis

Written by FX Empire