The GBP/USD pair initially fell during the course of the day on Friday, but found support yet again at the 1.60 level and bounced enough to break the top of the hammer from the Thursday session. This of course is a very positive sign and the fact that we have formed a hammer on the weekly candle from the previous week doesn’t exactly hurt the case for the British pound going higher either. Because of this, we are believers that the British pound will continue to go higher, but recognize that we need to get above the 1.62 level to really pick up any significant amount of momentum. We ultimately believe that the longer-term charts are suggesting that we could go as high as 1.72 if we break out, but we also recognize that the market will be choppy all the way up there as it would be a very significant turn of events.
We recognize this is a market that could be “bought on the dips”, and the fact that the GDP numbers out of Great Britain were right in line during the session on Friday suggests that the market should continue to give the British pound a bit of a left. While we do not think that this move will be fairly quick, we do recognize that the longer-term outlook is positive at this point, and have no scenario in which we are willing to sell this market quite yet, at least not one until we get below the 1.5850 level, something that does not look very likely at the moment.
On top of that, if we break out above the 1.62 level, it’s essentially breaking the neckline of an inverted head and shoulders pattern, so that positive as well. In that particular scenario, we would anticipate that the market would of course offer quite a bit of buying opportunities on both short term and daily charts, so we are bullish under all time frames at the moment as we believe that the British pound has essentially “bottomed” in this area.
