The pound has been gaining steadily against the dollar in the past few trading days, as strong data from the UK and doubts on the Fed’s September taper plan have combined to push GBP/USD past key resistance levels.
On its shorter-term time frames such as the 15-minute and 1-hour charts, the pair is forming a bullish pennant around the 1.5650 area. A strong break to the upside could mean that the rally could carry on until the next resistance at 1.5750. Stochastic is in the middle, which suggests that the pair could break either way.
A downside break could pave the way for a retracement setup, which could involve a bounce from the 1.5600 major psychological support level, before the pair resumes its rally.
There are no reports due from the UK today so the market catalysts are the US consumer sentiment figure and housing starts.
By Kate Curtis from Trader’s Way.