The GBP/USD pair fell during most of the session on Tuesday, but bounced near the 1.6950 level in order to turn around and form a hammer. This hammer suggests that the market is building pressure to breakout above the 1.70 level, and that it’s only a matter of time before it happens. If that happens, we feel that this market goes much higher, probably towards the 1.75 level given enough time, but I suspect that the market will be a “buy on the dips” type of situation, therefore providing plenty of opportunities for shorter-term traders.
That being the case, we feel that this will be a very profitable move, assuming we get above there. That should signal that the British pound continues to strengthen overall, and that will be a good sign for the future, against most currencies not only the US dollar. With that being the case, we feel that the British pound will be one of the stronger currencies overall, and will look to go long of it, not only in this market, but many other ones.
We believe that a break above the 1.70 level would send this market much higher, but it also would turn loose the strength of the British pound, thereby making this a bit of a signal for just about any market that contains the GBP. With that being the case, we are very interested in this chart, and it is one that we look at time and time again. Not only would the 1.70 level offer quite a bit of resistance, but you have to keep in mind that the shooting star also does the same. Because of that, a break above the top of the shooting star is almost like a “double buy signal”, and as a result would have is very confident.
We believe that pullbacks should find plenty of support below, especially considering that the candle that got us to this area was so impulsive. A supportive candle below would be used as a buying opportunity by us as well as the breakout.
