The GBP/USD pair fell below the 1.60 handle on Monday, but did bounce in order to form a hammer. This could be a very potent sign for the buyers to step back into the marketplace as it shows the 1.60 level does bring in support.
This is a very good sign for the buyers, as the pair has broken out of an ascending triangle from the summer; it measured four he moved to 1.63 based upon the height of that triangle. Because of this, I am still bullish of the spare, and think it a break of the highest from the Monday session would be a strong enough signal to start buying this market again.
Mervyn King, the head of the bank of England has recently stated that he believes "monetary policy is just about right in Britain" and this suggests that the central bank is on hold at the moment. Contrast that with the Federal Reserve which is expected to ease monetary policy later this week, and you can see why money is running to the British pound.
1.63 And beyond
Not only do I think we will see 1.63, but I believe we will see even higher prices than that. If the Federal Reserve gets aggressive with its monetary policy, we could see 1.63 in very short order. This pair does move quickly at times, and this could be one of those times. This scene sent out, pullbacks are to be expected, but I see them as opportunities to buy the British pound on the cheap.
Until we get below the 1.57 level, I have a hard time believing that selling this pair will be the way to go. That is the top of the ascending triangle has recently broken out, and as such it would take at least that kind of move to get me bearish of this pair. Going forward, I will be buying pullbacks as they appear and show signs of support on shorter-term charts such as the four hour time period. As for selling, I won't bother as I believe this trend is well intact, and very strong.