The GBP/USD pair fell during the session on Thursday, but bounced hard enough off the 1.5750 level in order to form a hammer. This hammer tells us that this market wants to go higher, and as a result that’s exactly how we are going to play it. On a break of the top of the hammer, we think that this market will make its move back towards the 1.60 handle, and probably even farther than that given enough time.
The British pound is been very strong over the last couple of months, and we feel that this is just the next natural step in the already strong uptrend that we’ve seen. With all things being equal, we feel that this market could very easily have 1.60 the next few sessions, and possibly over that level given up couple of weeks or, possibly months depending on what the Federal Reserve does.
Speaking of the Federal Reserve, we need to pay attention to what they do as far as tapering off of quantitative easing. Right now, it must be said that it appears that the Fed is going to have its work cut out for a convincing the markets one way or the other, but it seems that the markets are starting to think they will not taper off of quantitative easing, and that of course is going to be very bearish for the US dollar. We believe that is part of what’s going on in this market.
On top of that, it appears that the British are not ready to extend easing anytime soon, unlike what the market had thought just a few months ago. With that being the case, makes perfect sense of this pair continues to go higher, even though we can expect a lot of volatility in the short term. Longer-term trader should love this pair though, as it does look like it’s ready to continue trending overall. However, if you have a weak constitution, you may find this pair a little bit too volatile for your liking. In the end though, we think up is the only direction.
Written by FX Empire