The GBP/USD pair tried to rally during the session on Friday, but found enough resistance at the 1.68 level to pull back and form a shooting star. With that, it feels like the market is ready to pull back significantly, perhaps heading to the 1.67 level. A break down below there would be a very negative sign, perhaps sending this market as low as 1.65 or so. That level should be a massive support area though, and as a result I think that buying down in that area would be the way to go on short-term charts. However, it’s also likely that we don’t go below the 1.67 handle as this market has been very strong over the last several months.
Essentially, the market looks as if it is been grinding somewhat sideways after a nice impulsive move higher. With that, I think that the market simply is trying to take a rest at the moment before moving higher. The fact that we formed a shooting star means one of 2 possible trades for me.
The 2 possible trades that I see.
Ultimately, I think that the top of the shooting star could be a segue to the 1.70 level. In other words, if we can break above that level, I believe that the market will head to that level. On the other hand, we could pull back from here and look for support at various levels. The 1.67 level below suggests support, and as a result a short-term hammer or candle like that could be used. On the other hand, we could get down all the way to the 1.65 level, where I would be much more aggressive about my position size and time horizon. I think that the bounce could be very significant from there, and we still could go to the 1.70 level.
In fact, having said that I believe that we will bounce around during the course of the summer as we start to slow down our trading actions. This could lead to various trading opportunities time and time again, but I will remain trading with an upward bias until we get below the 1.65 level, something that I do not see happening anytime soon.
