GBP/USD has been a bit of a juggernaut lately. After all, this pair has been banging against the 1.57 – 1.58 resistance level even as the bears sell off aggressively. Although this pair hasn’t broken out to the upside yet, the fact is that the buyers are simply not giving up.
There are a lot of possible reasons for this, not the least of which is the fact that Mervyn King of the Bank of England said he believed that monetary policy in England was where it needed to be. This was when the market thought that the English were going to be easing further, so a readjustment had to be made, and the Pound was bought.
Add to this the possibility that the Federal Reserve could be easing in the month of September, and you have the recipe for a higher priced cable pair. This pair will also react to the “risk appetite” of financial markets, and there are signs in the S&P 500, Dow, and gold markets that we are about to see break outs to the upside in the near future.
1.58 is my level
I need to see 1.58 broken to the upside on a daily close in order to go long of this pair. Once I do see this, I think that the 1.63 level will eventually be tested, with the 1.60 level acting as a hurdle along the way. This pair looks like one that is building pressure to the upside, and as a result we could see an explosive move higher. Think of a beach ball being held under water, and what happens once the ball is let go of. This will cause the ball to jump explosively higher to get out of the water.
The pair should act like this, and as such I think we could see some real momentum. This is the kind of momentum that I want to be a part of. The daily close will be vital as there is also a high potential to see a false breakout. Because of this, waiting for the daily close to print above the 1.58 as it will show the bears giving up.