The GBP/USD pair fell during the session on Tuesday, breaking below the bottom of the neutral candle. However, we got enough support at the 1.6050 level in order to bounce and form a hammer. This hammer suggests to us that this market is going to go higher, and as such we are willing to buy this market on a break above the neutral candle from the Monday session. Essentially, this negates the move that we sold during the session earlier in the day on Tuesday, and therefore we still look at the neutral candle as being archived line.
If we can break above the top of that guideline, we think the 1.6250 level will ultimately be targeted, but if we can get above that we think that the 1.65 level will be targeted after that. Above 1.65, we are heading to the 1.70 level over the longer term as well. However, if we pullback from here, we still believe that there is plenty of support below that could lift this market. The most obvious spots is the 1.60 handle, but the 1.5850 level is massively supported underneath there. Because of that, we feel that this is a “buy only” marketplace at the moment, and as the markets fall, we will simply see more and more traders trying to take advantage of what is obviously an uptrend that has gone sideways recently.
Speaking of the consolidation that we’ve seen over the last couple of months, that is quite common after seeing a very parabolic move which we did have before then. Simply put, the markets need to calm down and find more buyers to step in and support the move higher. Because of this, we feel that this market will continue higher overall, barring some type of surprise announcement on the Federal Reserve which we do not expect to see.
Obviously, the one thing that could really could this market into a funk would be if the Federal Reserve tapering off of quantitative easing. We do not see that happening anytime soon, and as a result we think the British pound will ultimately triumph.
Written by FX Empire