The GBP/USD pair initially broke higher during the course of the day on Wednesday, but found enough resistance above the turn things back around and form a bit of a shooting star. The shooting star is of course a negative sign, but we also recognize that there is quite a bit of support just below as we have been consolidating for some time. Because of this, we feel that the market should ultimately find support at lower levels, and as soon as he gets said, we would turn around and start buying. We believe that the 1.55 level below will continue to be the absolute “floor” of this market.
We have the 1.55 large, round, psychologically significant number which of course should offer quite a bit of support. With that being the case, we would anticipate a lot of buyers stepping into the marketplace somewhere near that level. The 100 day exponential moving average is currently hugging that level as well, so we believe that the buyers are simply waiting for better pricing to get involved again. Below there, we have an upward trend line, which of course should support this market as well. Ultimately, we believe that the market should find buyers again and again, and as we get towards the end of the summer, we should find more liquidity in the marketplace. With that, the market should be bullish overall, because quite frankly the British pound has been holding its own against several other currencies, including the US dollar. The fact that he can simply stay sideways against the US dollar suggests that perhaps the British pound will be one of the stronger currencies going forward, even if you don’t use this particular currency pair to play bullish attitudes on the British pound.
If we broke down below the bottom of the uptrend line, we could then start to think about selling. Ultimately though, we believe that this market is going to reach towards the 1.58 handle, and then eventually the 1.60 level as it is a magnet for price on longer-term charts.