The GBP/USD pair had a very strong session on Thursday as we broke above the top of the shooting star from Wednesday. This was based upon the last few sessions of upward momentum, and we feel now that the market is ready to head back to the next major resistance barrier, the 1.55 level. With that, the market should find massive sellers in that region, and as a result this is almost a bit of a “two speed” market right now. With that being said, we believe that the shorter-term traders will be bullish while the longer-term traders of course will be bearish. The candle of course was really strong for the Thursday session, and that of course means that buyers are in control at the moment.
I believe that pullbacks will continue to offer value on short-term charts, but recognize that it is still a countertrend move. With that, although there is plenty of bullish pressure, the reality is that there is even more bearish pressure for the longer term as the US dollar continues to be the strongest currency in the Forex markets. Because of that, I believe that the longer-term traders will reenter the market to start buying the US dollar based upon value at that point. Once that happens, we would be more interested in trading this market from a larger standpoint. In other words, buying on this bullish move will be done with a smaller position than selling at the 1.55 handle.
We also believe that the market will be a bit volatile though, so you will have to be able to withstand that if you are going to buy from the short-term perspective. Longer-term traders will probably have an easier go of it by selling at the 1.55 handle, because not only is it with the overall trend but it is also an area that has massive amounts of resistance just above it. In fact, we believe that there is a “zone” of resistance all the way to the 1.58 handle, making it a very difficult area to overcome.