The GBP/USD pair initially had a very strong showing during the Wednesday session when word got out that the U.S. Congress agreed to a “fiscal cliff” deal. During Asian trading, we saw this pair shoot straight up and as high as 1.6379 during that session. However, since then time period we saw the pair fall directly, and as a result we managed to break down below the 1.63 handle again.
We’ve been watching the 1.63 handle, and recognize it as a bit of resistance too much higher prices. If we can get above that, we think that eventually this pair will hit the 1.70 level, but the fact that we failed during the session on Wednesday would have a somewhat concerned. It doesn’t mean that we are thinking that this pair suddenly going in or some new downtrend rather that it just simply isn’t ready to do the hard work that it will take to climb higher at this point.
A break of the lows from the Wednesday session could signal a return to the 1.6100 level and as a result have a lot of traders selling. We would consider doing so with a small position, although we are very bullish of this pair overall.
The easier trade for us will be to let this pair fall back down to 1.6100 or so, and as a result we would look for supportive price action somewhere around that general vicinity. This would be a classic pullback that we think would attract quite a bit of buying.
Alternately, if we managed to break the top of the shooting star that formed during the Wednesday session, this would be an extraordinarily strong show force, and have us buying this pair hand over fist. Regardless, we do think that this will eventually happen, now the question is whether or not we shoot straight up, or we pulled back and find support in order to grind much higher going forward. As for selling, apart from the very short-term move down to 1.61 is a possibility, we have no interest.
Written by FX Empire