After making a strong break past the 1.6800 major psychological resistance earlier in the week, GBP/USD might need to make a quick pullback before pushing for more gains. After all, the BOE interest rate decision turned out to be a non-event, with traders waiting for the minutes of the meeting before pushing the pair much higher.
The Fibonacci retracement tool applied to the recent swing low and high on the 4-hour chart shows that the 38.2% level lines up with an area of interest. However, the pullback might be too shallow to reach this area since stochastic is already indicating oversold conditions.
A bounce off 1.6800 could lead to a rally back to 1.7000 if UK reports continue to come in strong. Going long at 1.6800 with a stop below the 61.8% Fib and a target of 1.7050 could mean a 2:1 return on risk.
By Kate Curtis from Trader’s Way