The GBP/USD bounced back and forth during the session on Wednesday as the 1.61 handle continues to attract support. Looking at this market, we still feel that it is relatively supportive, and as such we would be willing to buy a supportive candle.
We also would be willing to buy a break of the candle for the Wednesday session as it would show follow through on the support. However, we recognize the fact that this market could fall further, but see the 1.60 level as very supportive.
Over the summer we have broken out of an ascending triangle, and as many of you that follow the videos that we make know that we had seen a target of 1.63 as move for this past fall. We solve that happened, and then we pulled back to the 1.58 handle, the site of the original breakout. Now that that has been retested, we bounced back towards the 1.63 handle, which of course proved to be resistive again. Now we find ourselves pulling back again.
Looking at the chart from a longer-term perspective, we feel that the 1.60 level should be supportive, but the 1.58 level will be the “line in the sand” for the buyers of this market. That level simply has to hold as support and prices need to stay above it in order for the market to continue higher.
A break above the 1.63 level would be significant in its bullishness, and at that point in time we feel this becomes a buy-and-hold type of market. Looking forward, we could see prices as high as 1.70 if that does in fact happen. This is our base case scenario going forward, and we do believe that it will happen eventually.
Looking at candles, we think that more of a pullback could be coming, so we are not ready to start buying quite yet. On a supportive candle close to 1.60 we would be much more confident in doing so and in fact would be much more aggressive. However, as stated above we recognize the fact that a break of the highs from the Wednesday session does suggest that momentum is starting to swing back towards the upside, and we would of course by their as well.
Written by FX Empire