The GBP/USD rose during the session on Tuesday, but failed to close above the 1.61 level in a sign of strong resistance. The resulting candle is a shooting star, and as a result this looks like weakness showing up in the pair. However, I think looking at the bigger picture, there should be bullishness in this market on the margin, and I am looking for another signal to go long.
The 1.62 level above is providing a lot of resistance as well, but I think we will get over it eventually. The recent pullback has been bid up higher over the last couple of weeks, and I think this will continue as the 1.58 level held as support.
The 1.58 level was once resistance for the ascending triangle that formed over the summer, and as a result those that missed the move have piled back into the market. The fiscal cliff will continue to dominate the headlines, and as a result there is always potential for sell offs, but the longer-term charts for this pair suggest that we are going all the way to the 1.70 level.
2013 – 1.70
In fact, I think 1.70 will be seen next year in this market. With this being said, I think that it won’t be a straight shot higher. This market will have pullbacks, and those in general will be buying opportunities in my opinion. I think this will remain true until we get a move below the 1.58 handle. At that point, I would think the bullish trend is dead as we return to the consolidation that was so prevalent in this pair earlier this year.
The pullback that looks likely at this point should find buyers at the 1.60 level, and if we get down there – I am willing to buy the first sign of support that I see. A hammer or green candle at that level will do as I think this is with the longer-term move coming. As for selling, I simply won’t do it even though I see the likelihood of a pullback over the next few days.