The GBP/USD pair broke higher during the session on Tuesday, using the 1.65 level as a springboard, as we broke above the top of the range from the Monday session. That was reason enough for us to start going long, and we believe this market will more than likely head towards the 1.6625 region, where it should see a significant amount of resistance.
That area could keep the market down for a while, but ultimately I believe that we break into that region, and back into the previous consolidation area which extends all the way to the 1.68 level. It’s above the 1.68 level that we should start to see this market accelerate to the upside and finally favelas potential of reaching the 1.70 level, a place that I had targeted quite some time ago. The fact that we have pulled back does not change my opinion, as I believe the 1.65 level was a massively significant support region that had to be retested that eventually.
200 pips of support.
I believe that this market has roughly 200 pips of support below, extending all the way down to the 1.63 handle. With that, I believe that selling this market is almost impossible, as there should be plenty of interest in going long sooner or later. A supportive candle down there would be reason enough for me to go long, and I would still anticipate going all the way to the 1.70 level. Granted, this is in an overnight trade, and it will take a certain amount of time to get up there. After all, there is a much noise above, but that noise has been chewed through more than once, so I have a hard time believing that it’s anything that’s going to be permanent or fatal for the buyers.
The British pound itself has been strong in general recently, so this setback really is pretty minor in the big scheme of things. All things being equal, I still believe that the British pound will continue to be one of the favored G 10 currencies this summer, and as a result I am very bullish now that we have tested and proven the 1.65 level be somewhat supportive again.
