The GBP/USD pair fell during the bulk of the session on Tuesday, but as you can see found enough support just below the 1.66 level to turn things back around and form a candle looks somewhat like a hammer. It’s probably a bit more neutral than hammer-ish, but at the end of the day I believe that the market will treat this area as support as it has been so supportive of the recent rectangle that we have been stuck in. Because of this, I believe that a break above the highs for the session is reason enough to start buying.
While I ultimately believe that the market will break out, I don’t necessarily think it’s going to happen right away. Nonetheless, the market could rise to the 1.6750 level without too many issues in my opinion. A break out above there since the market looking for the 1.70 level, which is my ultimate target. I believe we will hit the target sometime this year, but it may be several months the way things are going.
British pound strength.
The British pound is showing strength in general, and the fact that he can hold its own against the US dollar says a lot. After all, the Federal Reserve is tightening monetary policy, through various tapering measures. While a lot of other currencies are struggling against the US dollar, the fact is that the British pound can hold its own shows just how strong it is overall. Because of this, it’s not necessarily this pair that I will use this chart to make sense of. What I mean by that is that if we see bullishness in this pair, I’m very interested in looking at the GBP/JPY pair, or perhaps the GBP/CHF pair. Think of this as a gauge of pound strength more than anything else, although there will certainly be trading opportunities here as well.
Going forward, I still believe that we will hit the 1.70 level, but it might take a little while as there is a lot to work through in this general vicinity.