The GBP/USD pair fell during the session on Thursday after initially trying to surge higher. The oddly shaped candle ended up being somewhat of a shooting star, but isn’t quite shaped correctly to get us too concerned. In fact, we think the 1.57 level is the very bottom of the support area, and as such we are willing to buy supportive candles still until we break well below that level.
The ascending triangle the broke higher did in fact suggest that we were going to the 1.63 level, and there is not anything on this chart currently that makes us think that this has changed. This market looks very interesting to us right now, and we do think that the breakout was a logical one as the Bank of England has recently been heard stating that monetary policy was just about right. On the other hand, a lot of traders are expecting the Federal Reserve to implement some new form of quantitative easing.
With this interest rate differential widening in the bond markets, at least in theory, this currency pair should continue higher. If we manage to break the top of the Thursday range, we think this would be a majorly bullish signal, and wouldn’t hesitate to go long at that point in time. Again, a supportive candle down to the 1.57 level does the same thing for us.
It really isn’t in till we get well below the 1.57 level on a daily close that we are willing to start selling this pair. In fact, we believe that the 1.5650 level would need to be broken in order to be comfortable selling. Remember, this pair is a bit of a “risk on, risk off” type of pair, and as such will rise and fall with the risk appetite around the world in general.
We have a parameters, but need your with the Federal Reserve Chairman says later today at the meeting in Wyoming and if there are any hands of monetary policy going forward. If there are hints of quantitative easing out of the Federal Reserve, this pair should continue higher and eventually hit the originally suggested target of 1.63 or so.
Written by FX Empire