The GBP/USD pair initially fell during the course of the day on Tuesday, but found enough support at the 1.63 handle to turn things back around and form a hammer. This is an excellent place to see this hammer, because this was the gap that we blew through to the upside. With that, it appears that the market is ready to go higher, probably testing the 1.66 handle. If we can get above the 1.6650 level though, we think that the market will more than likely go to the 1.70 level given enough time.
With that, we are bullish of the British pound at least for the short-term, but will be paying serious attention to the 1.6650 level as time goes on. The British pound has been oversold for some time now, and on the weekly chart we have formed a nice-looking hammer at the 50% Fibonacci retracement level. Granted, we got a little bit of a boost last week due to the Scottish Independence vote, but now that’s the excitement has worn off we should start to see the true feeling when it comes to the British pound. We think that this market has the ability to break out to the upside, but we will have to pay attention to the next couple of sessions in order to decide which way to go.
Right now though, we be the first to admit that it’s very difficult to sell this market and we do not see the opportunity to do so anytime soon. The 1.63 level is obviously very supportive, and with that we are more than willing to buy pullbacks to that general vicinity. We think that ultimately this market will regain its mojo again, going higher but there’s probably a lot of consolidation and bouncing around the we have to do in the meantime.
The 1.60 level below is the floor as far as we can tell, and right now we don’t anticipate this market following below there. In fact, the British pound might be a little bit different than most other currencies as it could actually gain against the US dollar, unlike the Japanese yen or the Euro.
