The GBP/USD pair initially tried to rally during the session on Friday, but the weight of the downtrend continues to keep the buyers a bit calm. However, we feel that the 1.6250 level should continue to be supportive enough to continue to have this market eventually break out to the upside. After all, when you look at the weekly chart, you see a beautiful hammer at the 50% Fibonacci retracement level, which of course makes it very interesting for us to go long if we can break the top of that hammer.
In the meantime, the gap that we had formed just a few weeks ago should offer support now. We are ranked there, so we can find some type of supportive action in this general vicinity, we are more than willing to start buying again. We recognize that a bounce from here will more than likely face a lot of resistance in general, but we feel that eventually we will build up enough momentum to break out. The 1.6650 level been broken to the upside is exactly what we need to see in order to start hanging onto a long-term trades to the upside.
In the meantime though, if we bounce from here without enough momentum to break out, we could very easily go to the 1.65 handle for a short-term buying opportunity. As far selling is concerned, we are bit hesitant to start selling in this area, at least until we get below the 1.62 level. If we do in fact sell below that area, we would then aim for the 1.60 level. That level of course should be supportive based upon the fact that it is a large, round, psychologically significant number of importance not only based upon the number itself, but previous action on longer-term charts.
The US dollar of course is the favored currency of Forex traders around the world right now, but the British pound has been a bit of an outlier, so because of that we are willing to buy this pair. This is about the only currency that we would buy over the US dollar, and it is basically because of the potential longer-term set up that we are presently working through.
