GBP/USD has been very bullish of the last several sessions, and during the Thursday trading day even managed to approach the 1.59 level. The pair had been recently consolidating in an ascending triangle, and as such I have been waiting for what seems like forever to buy this pair. However, by the end of the Thursday trading session we had formed a shooting star.
The shooting star of course is a bearish signal, and it is and resistance but the reality is that the breakout of the ascending triangle is much more important than the 1.59 level. In other words, it should prevail over time. This isn't to say that the pair won fall, in fact I think it will pullback but rather to collect more buyers closer to the 1.58 handle in which to go long.
There is some doubt that the Federal Reserve will ease its monetary policy in September, but there is no doubt that the Bank of England isn't going to be doing so very soon. Because of this, the interest rate differential is somewhat safe in this currency pair and people will treated as such. The British pound should continue to strengthen over the US dollar in the foreseeable future.
Looking for support at 1.58
If we get the pullback to 1.58 that I think we will any type of supportive action in that area would have me adding to the position in going long in a much bigger way. Looking forward, I think that based upon the triangle, we could see as high as 1.63. Ironically, that is also roughly where the highs from April are that started this big mess in the first place.
When you look at the chart from a longer-term perspective, we are essentially stuck in massive consolidation between 1.5250 and 1.63 or so. So the fact that I am calling for this 1.63 level to be attempted really is only a continuation of the previous consolidation. In other words, we've been range bound for a very long time in the bigger scheme of things, and as such this move really shouldn't be a surprise.