The GBP/USD pair fell during the session on Wednesday, breaking well below the 1.55 handle during the day. However, you can see that the markets did in fact find enough support to bounce back over that level, and form a nice looking hammer. This hammer of course suggests that the support at the 1.55 level will in fact lift the market from this point.
If that’s the case, we feel that this market will make another attempt of the 1.5750 handle. While we recognize that this is a necessarily a long-term move, the truth is that we are at the end of the summertime, and it’s going to be difficult to find those massive moves. If that’s the case, sometimes you have to simply work with what the market is giving you, and right now it’s a clear signal that the British pound does not want to fall over all.
On top of that, you can make a bit of a channel to the upside in this market right now, and we did get close to where that bottom line would be. That being the case, we think it makes perfect sense of this market bounces from here and will be buying on a break of the top of Wednesday’s trading range. If we do manage to get above the 1.5750 level, we think this market goes much higher, and the 1.60 handle is almost assured at that point in time.
On the other hand, we could possibly break down below the bottom of the hammer, which of course is a very bearish sign. At that point in time, we would also want to see a break of the 1.54 handle, which we believe opens the door to the 1.5250 level in the short term. However, we believe that the upside is much more likely than the down, and because of that we are much more comfortable going long as this pair has been so bullish during this past couple of months. However, we simply have to wait for the market to make its move, and follow.
Written by FX Empire