The GBP/USD pair shot higher during the course of the day on Wednesday, breaking above the 1.63 handle. I believe that a lot of this would’ve been due to potential “front running” the Scottish Independence Vote. Because of this, the market try to break out, but I think that there are far too many nervous traders out there to stick to the position. All things being equal, this would normally be a very negative sign as we formed a shooting star right at the gap, but I think this is a special situation to say the least.
I think that the Scottish will stay within the United Kingdom, and then the question becomes how much higher can the British pound go? I believe that a break above the top of the shooting star should send this market looking for 1.66 in the short-term. I don’t know that we can change the entire downtrend, the most certainly this pair is oversold to say the least. In fact, I already have a long position put on in an attempt to do a bit of “front running” myself.
Fortitude will be needed.
This is one of those times where a certain amount of intestinal fortitude will be needed to trade the market. After all, it’s not every day that you have the potential breakup of a union, and as a result it causes a lot of concerned. Ultimately though, through my research I believe that the Scots will stay within the United Kingdom given enough of a reason. Keeping the British pound is without a doubt a huge reason.
I believe that a lot of the doomsday scenario comes down to the drama coming out of some of the British tabloids, and at the end of the day I think that the market will breathe a collective sigh of relief. On a break of the top of the shooting star, the British pound will skyrocket. On the off chance of the Scottish to leave though, I would anticipate 1.60 been tested almost immediately. This is not a place to be trading at this moment in time unless of course you have the strength and courage to do so.
