The GBP/USD pair fell again during the session on Thursday, but as you can see the 1.55 level continues to offer plenty of support. In fact, we formed two hammers before this candle, and as a result it looks like this area is in fact going to bring in a lot of buyers. Is because of this that we believe that this market will continue to go higher from here, and we are not interested in selling at the moment.
In fact, we believe that this is a nice little short-term set out, we are not looking for some type of major move out of this. After all, we are at the end of summer, and a lot of the larger players are simply away at these, and not worried about what’s going on in the currency markets. Because of this, a break above the highs for the session on Thursday is enough of a reason for us to go long, especially considering it would also include a break above the highs from the hammer on Wednesday.
While it is possible that we break down below the bottom of the hammer from Wednesday, we need to see the 1.54 level as supportive, and we need to get below that on a daily close in order to start selling. At that point time though, we would be a bit cautious but recognize the fact that the market would more than likely head towards the 1.5250 level. That is the next support area, and the market does tend to simply go back and forth between these areas over time, and that would coincide with some type of dollar strengthening move, something that certainly could happen given all of the turmoil and headline risks out there at the moment.
All that being said though, we still think that the easiest path is from here, and are much more comfortable simply buying a breakout to the upside. We have a hard time believing that the 1.5750 level will be taken out though, we think it’s just a move that will last about a week or two.
Written by FX Empire