The GBP/USD pair initially fell during the day on Tuesday, but found enough support near the 1 TB two level to turn things back around and form a positive candle. Ultimately, the market looks as if it is ready to continue going higher, perhaps heading to the 1.550 level. However, there is a significant amount of resistance between here and 1.50 level, so it is almost impossible to start buying at this point. On the other hand, if we get some type of resistive candle we would be able to sell as it goes with the longer-term downtrend and we recognize that the 1.55 level is a large, round, psychologically significant number. Beyond the large round number, we also have the 38.2% Fibonacci retracement level just above there, so we feel that sooner or later the sellers will continue to go back to the market and short the British pound overall.
We believe if we get that selling opportunity, the market should then head to the 1.52 level, and then possibly the 1.50 level after that. On the other hand, if we break above the 1.56 level that market should then be a “buy-and-hold” type of situation. At the moment though, it looks like the US dollar will continue to get softer over the next session or two. Ultimately though, the US dollar will probably continue to strengthen over the longer term, especially if the Federal Reserve comes out with some type of bullish statement during the day today. Remember, we have the interest rate decision coming out of the United States, but more importantly we have a statement, which of course could be a catalyst for US dollar strength or weakness depending on what is said.
Expect a lot of volatility, but in the end you have to play the larger numbers. Because of this, we are waiting to see daily candles to confirm or deny particular setups that we are paying attention to. This is a market that should give us a nice longer-term trading opportunity soon, but we simply have to wait to get clarity.