The GBP/USD pair rose during the session on Wednesday, breaking the top of the shooting star that had been formed on Tuesday. We have been saying for a while now that we think this market is going to bounce between the 1.55 support level, and the 1.5750 resistance level. Because of this, this is a short-term traders market, and as a result we think that the shorter-term markets will be more likely the place you want to start looking at in order to make a few pips here and there.
We believe that short-term pullbacks will be the opportunity to start going long, and as a result that’s exactly what we are going to do. However, since the area that the market is consolidating and is relatively small, we will more than likely be taking trades that are of the 50 pips variety, and because of the choppiness we believe that there will be plenty of trading opportunities, and this is probably a situation where you can repeat over and over again on the 15 min. chart, as a lot of short-term traders tend to prefer.
However, it’s difficult to imagine that we are going to get above the 1.5750 level before the Federal Reserve makes its decision on tapering off of quantitative easing. That being said, it appears that the market is simply trying to wind up and perhaps start going higher. Is an interesting conundrum though, because the pair is essentially saying that the Federal Reserve may not taper off of quantitative easing, which of course would be very dollar negative.
The question then becomes whether or not it is about the British pound, or the US dollar. The next couple of weeks should be very interested in this pair, as the Federal Reserve does make that announcement two weeks. That being the case, over the next several sessions we again believe that short-term trading opportunities will abound, but once that announcement is made we could really start to take off in one direction or the other. Remember though, keep your stop losses handy.
Written by FX Empire