The GBP/USD pair bounced a bit during the session on Monday, proving the 1.60 level to be as supportive I had originally suspected. This market has been strong for some time, and I think this could continue to be the case going forward as well. This market will more or less be based on the value of the US dollar, as the Federal Reserve cannot taper off of quantitative easing. The Federal Reserve will not taper off of quantitative easing anytime soon, and in fact I believe that it won’t happen until the middle of 2014. This should continue to propel the Pound – and most other European currencies – higher against greenback.
The cable pair will also continue its move based upon the idea of the monetary policy statement this week out of London. The Bank of England is looking at no chance of loosening monetary policy, so it is unlikely that the Pound will fall for any length of time.
The battle between the banks.
The central banks are on opposite ends of the spectrum, and it is obvious by the fact that the Federal Reserve acts that it is unlikely that we will see any kind of strength out of America when it comes to this kind of thing. The Dollar will more than likely be the whipping boy of the world, and with the Pound showing strength currently, there is no reason to think that the direction of this pair will change.
The 1.60 level should be supportive going forward, so any time this pair falls back to it, I am interested in going long. I also believe that the 1.65 level will be targeted in the end, as the market likes to move in 500 pip increments over time. I think that clearing the 1.63 level leaves the Pound likely to achieve that target, and I would even consider adding to the position at that point in time. The markets look primed to continue in that sense, and as a result I already started a small long position this past morning.
