The GBP/USD pair fell initially during the session on Monday, but as you can see bounce back above the 1.64 handle by the end of the day. This bullish action of course formed a nice-looking hammer, we now think that this pair is ready to continue going higher, challenging the 1.65 area, and then potentially higher levels than that. Ultimately, we think this market will go to the 1.70 handle based upon British pound strength more than anything else, as the US dollar isn’t exactly a week currency at the moment. With that, we are deftly buyers on a break in the top the hammer as we think that the uptrend continues.
All things being equal, selling is not possible, basically because of the way that the British pound has been acting lately, and the fact that the 1.63 level should continue to be supportive. The shape of the candle of course tells us that there is buying pressure below, thereby making the market very interesting to us.
Quite frankly, the British pound is one of the few currencies out there that we like against the US dollar for the longer-term, as the Pound has been so strong against most currencies around the world. You can also use this currency pair is a bit of a signal for relative strength, as the pair going higher signifies that the British pound should be going much higher against other currencies such as the Swiss franc, Japanese yen, or many of the other commodity-based currencies. After all, if the British pound look strong against the US dollar, is going to look especially strong against the Japanese yen as it is being sold off.
That being the case, this is a pair that you should be watching even if you are trading it. There might be better returns to be had by buying the British pound against other currencies, or we may just find a nice grind higher in this market. It’s a scenario which you can play either way, simply because it comes down to your personal comfort.
