GBP/USD Daily Outlook - 17 September 2014

The GBP/USD pair went back and forth during the course of the day on Tuesday, as we continue to wager on whether or not the Scottish vote for independence. The truth of the matter is that the momentum is starting to swing towards those who want to stay within the United Kingdom. With that, I feel that this market will skyrocket as soon as those results come in.

I cannot help but notice that the weekly candle was a hammer, and that of course is a very bullish sign. If we can break above the 1.63 level for any length of time, I believe that the market should go much higher. I would believe at that point time that the market was trying to “get ahead” of the vote, and thereby taking advantage of the potential move higher as people become more and more comfortable with the idea of the Scottish not leaving.

Sentiment seems to be changing, or at least is an as cut and dry as once thought.

Anecdotally, it appears that most people in Scotland do not want to leave the British pound, so there is the possibility of this, leaves without it having any effect on the currency anyways, or at least nothing major. At the end of the day though, I think it’s just quite too difficult to break away in these conditions. It is not as if English lords are ripping through the Scottish countryside in enslaving the people. Yes, Scottish have a long and proud history and certainly want to be independent if all things were equal, but they are not. Scotland has greatly benefited by being attached to the British, and as a result I personally believe that they will stay.

Even if they do not, it’s easy to see that we have certainly been oversold recently. There must certainly be more risk to the upside than the downside at this point, and as a result I think that the 1.60 level is going to act as a little bit of a floor in the meantime. If we can get above the 1.63 handle, I think that the market first goes to the 1.66 level, and quite possibly 1.70 given enough time, and the appropriate vote.

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Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.