The GBP USD pair shot higher during the session on Wednesday, breaking the 1.63 handle finally. However, we could not keep above that level, and as a result it looks like the resistance is still somewhat intact. Nonetheless, we see the fact that we preach that resistance as a serious test, and one that the market only somewhat passed. The resistant action only tells us that the market certainly recognizes it as the top of the consolidation area, but in the end it appears that the market will breakout above there, simply based upon the fact that it was pierced so drastically during the Wednesday session.
On top of that, this market has look very bullish lately anyway, so does not surprise us at all that the market would go higher. The British pound itself has been very strong as of late, not just against the US dollar, but against most currencies. With that being the case, it makes sense that while the US dollar has strengthened against some other currencies, the fact is that the British pound is the most preferred currency at the moment, and it will continue to strengthen against the US dollar.
If we can get a daily close above 1.63 handle, or at least break the top of the range for the Wednesday candle, we think this market will continue to go higher, with the first stopping at the 1.65 handle. That area will offer significant resistance, but market will more than likely struggle there only temporarily and then eventually head towards the 1.70 handle over the longer term.
Any pullback at this point time will simply be the market trying to wind itself up in order to build up enough momentum to breakout to the upside. Not only are we willing buy a break above the range for the Wednesday session, we are more than willing to buy supportive candles below. Of special interest would be the 1.64 handle, as it did offer support previously. There is absolutely no scenario in which we short the British pound at the moment, unless of course the Federal Reserve were to come out and definitively say that they were tapering off of quantitative easing -something that isn’t going to happen anytime soon.
Written by FX Empire