The GBP/USD pair found support at the 1.250 level again during the session on Thursday, and bounced enough to break above the 1.53 handle at one point during the day. However, we did give back a little bit of the gains as the rally looked less than convincing. Nonetheless, as long as we are above the 1.5250 handle, we cannot sell this pair. A break of the highs for the Thursday session would be strong enough buy signal to get involved, or better yet even a move in close above the 1.53 handle.
The shape of the candle wasn’t overly convincing, but I being said that it wasn’t necessarily a done either. This is a nice gentle grind higher, and it does look like we have been moving in a channel of sorts over the last couple of months. With that being said, we would expect to see about somewhere in this general vicinity. We have maintained for some time that we think that this market will struggle to get above the 1.55 handle in the short term, and we still would plan on taking profit in the general vicinity.
The British pound should continue to enjoy a little bit of a rally as long as the equities market can keep it together. It turns out that the S&P 500 is currently sitting on top of significant support, so a bounce in that market should see a bounce in this one. After all, this is essentially a “risk on” currency pair, and we think that it could be again very soon. This market has seen a significant selloff, and that is why we are concerned about the above mentioned 1.55 handle. After all, it is a psychologically significant number, and there is a little bit of a cluster from February at that level.
The Bank of England is said to add to its monetary policy later this summer, and as a result we could see the Pound selloff a little bit later. This is why we hink it makes sense to see a little bit of a bounce here, only to see this market sell back off sometime in July or so.
Written by FX Empire