The GBP/USD pair initially tried to fall during the session on Tuesday, but as you can see found enough support to turn things back around and form a hammer. This hammer of course is very positive, and as a result a move above the top of it should send this market much higher. The 1.68 level seems to have held as support, and as a result we figure that the market will probably head to the 1.70 level next.
The shaven a hammer of course gives us a lot of confidence that the buyers are stepping into the marketplace as well, so quite frankly we feel that the selling pressure may have abated finally. This isn’t to say that the market is more than likely going to break out immediately, because we see the 1.70 level as massively resistive. With that, we are interested in going long, but recognize that it might be a choppy road forward.
We believe that the 1.70 level will course be an area of inflection, meaning that we will certainly be making some type of decision in that area. If we see a resistive candle at the 1.70 handle, we figure that the market would probably sell off again and aim for the 1.68 handle as well. On the other hand, if we get above there 1.70 handle on a daily close, we think that the market then become very supported, and therefore the buyer should come in and take control eventually. With that, we would fully anticipate seeing this market go to the 1.72 handle first, and then eventually the 1.75 handle.
With that we would be very interested in buying pullbacks as they will represent value going forward, as a break above the 1.70 level course should send a very clear message as to the intention of the marketplace. On the other hand, if we break down below the 1.68 handle, we believe that the 1.67 handle will be targeted, and then the 1.65 handle as it is a large, round, psychologically significant number that has proven itself in the past.
