The GBP/USD pair shot straight up during the session on Wednesday as the market even managed to break above the 1.5 for resistance level. Because of this, we believe that the British pound will continue higher, and aim for the all-important 1.55 handle. Of course, there is the non farm payroll number coming out on Friday and this will have an effect on this pair, but we think it’s very likely that this pair reaches the 1.55 level between now and then. If we can get above that level on a daily close, we could see significant momentum pick up to the upside yet again. On the other hand, it would be a perfect spot to see resistance come in and bring this market back down.
In the meantime, we feel that this market should continue to be a buy on dips, especially the short term charts. We believe that the market is trying to price in the possibility of the Bank of England not embarking on quite as much quantitative easing as anticipated. Quite frankly, the incoming Mr. Carney may not be able to loosen up monetary policy is much as anticipated based upon some reason numbers.
On top of that, there is a little bit of a selloff in the US dollar as far as his pair goes as the jobs number will be highly scrutinized after a very weak ADP report on Wednesday. With the weak economic numbers that have certainly shown up in the United States, a lot of traders have started to price in the possibility that the Federal Reserve keeps its monetary policy lose for much longer than anticipated. If that’s the case, then we could get back to be whole interest-rate differential play that this pair typically is used for. If that’s the case, the British pound should continue much higher, and possibly even crack above the 1.55 level.
On the other hand, this pair does tend to sell off in bad times, and a negative headline crossing the wires could do a number on it. At this point time though, we believe that the 1.5250 level should offer support.
Written by FX Empire