The GBP/USD pair shot straight up during the session on Monday as the cable pair still looks outstandingly strong. Within this chart, we still see the 1.63 level as a significant resistance area, but all in all still think it will eventually give way. You have to figure that on a trading session that saw very little in the way of volume, it is impressive that this pair managed to shoot straight up the way it did.
Also, we have to look at the fact that the pair did close towards the top of the candle, which of course is always a bullish sign. When we look at this chart, we look at it is a battle between two central banks. The Bank of England continues to stand firm in its monetary stance, while the Federal Reserve has just announced that is going to continue easing, and perhaps even expand on it if needed. All things being equal, this should be good for the pair going higher over the long term.
Looking at the history of this chart, we had an ascending triangle over the summer that broke out at the 1.58 level. The measure of that triangle suggested that we would go as high as 1.63, and we did. We fell from that area in order to retest the 1.58 level as support, which of course it held. Now we are rapidly approaching the 1.63 level, it appears that the continued breakout could be about to happen. In fact, it really wouldn’t surprise us to see this pair go as high as 1.70 over the long term.
We have been stating the 1.70 in this pair was going to be hit during the year 2013, and we certainly haven’t changed our opinion of that. With the Federal Reserve ready to flood the markets with US dollars, it would make sense that this pair goes much higher. Because of this, if we get a daily close above the 1.63 level, we will not hesitate to start buying this pair and hang onto it for a longer-term trade.
Written by FX Empire