The GBP/USD pair fell during the majority of the session on Tuesday, but found enough support near the 1.6950 handle to turn things back around and form a hammer. This is a market that has been extraordinarily bullish as of late, and as a result I think this hammer simply shows that we will continue to see pressure to breakout above the 1.70 level. The shooting star that formed on Monday shows that there is significant resistance there, but I feel that the market is going to try and try again until we breakout.
A break above the top of the range for the Monday candle not only shows the 1.70 level giving way to the buyers, but the breaking of the shooting star also show significant momentum. This momentum should carry on for a move to the 1.75 level, an area that has significance on the longer-term charts. The market likes to go from one of these major areas to the next, and as a result I tend to pay attention to these “big figures”, especially ones that are based on the 500 number.
Continue to watch the British pound in general.
While I believe that the British pound is going to break out anyway, I think that it is going to be one of the more favored currencies overall. Once this market breaks out above the 1.70 handle, I think the British pound is going to continue to gain against most other currencies around the world. One of the catalysts that could push this move in this market is the meeting minutes coming out of the Federal Reserve this week, which of course if they were dovish would have people selling the US dollar in general. At that point in time, I have a hard time believing that the buyers would step in and push this market much higher. In fact, I think it just only would exacerbate what I feel is essentially the inevitable. We are seeing more of a “risk on” type of marketplace overall, and that normally does well for cable.
