The GBP/USD pair fell hard during the session on Wednesday, but as you can see bounced enough to form a nice looking hammer. Although this hammer isn’t right at the 1.5250 level, we feel that it’s close enough that it does in fact suggest that the market is going to take an upturn from here. Simply put, the top of the hammer is at that all-important level, so we managed to break the top of the hammer, it does in fact mean something very positive.
That being the case, we feel that this market will more than likely continue higher, and on a move above the 1.5250 level, we are more than willing to continue pushing to the upside as the market should eventually try to reach the 1.55 level. As for the downside, if we managed to break the bottom of the hammer for the session, that would in fact make us think that the markets heading towards the 1.50 level. That is in fact what we had originally believed, but now it looks as if the British pound has a bit of a second life if you well. If that’s the case, we feel that this market will almost undoubtedly try to hit the 1.55 level in the next couple of weeks.
On the downside though, if we do breakout that we feel that the 1.50 level will be rather supportive, and because of that we think that a short-term trade would be set up at best. It really isn’t until we get well above the 1.55 level that we change your mind and our longer-term Outlook however, because we feel that we broke above that area I would only be a matter time before we broke out much, much higher. The selling of this pair below the 1.50 level is probably a fantasy at this point time, but if the Federal Reserve does in fact taper off of quantitative easing, that could be the catalyst to see that actually happened. Right now though, expect a lot of choppiness as we have seen it in several pairs over the last several months.
Written by FX Empire