The GBP/USD pair initially fell during the course of the session on Wednesday, but found enough support to bounce and form a hammer. This hammer of course shows that the market continues to see support in this general vicinity, and in my estimation based upon the fact that we are so close to the 1.50 level. This is of course a large, round, psychologically significant number, so it makes sense that there would be a bit of difficulty to break down below here.
The shape of the hammer is perfect, so a bounce makes sense. However, we need to break above the 1.5285 level in order to continue going higher. If we get that, it’s likely that we will then try to get to the 1.55 handle given enough time. That area of course is massively resistive as it was once significantly supportive. If that happens, I would anticipate a short-term buying opportunity in this particular pair.
US Dollar remains strong
The US dollar continues to remain strong overall, and as a result I do not believe that long-term buying opportunities are going to present themselves. Because of this, I think that any rally has to be taken with a grain of salt, and the first signs of resistance should be sold. On the other hand, if we break down below the 1.50 level, I think that that is a significant sign of weakness, and should send this market much lower. I think that level is significant, and because of that I of course am watching it but recognize that the buyers will more than likely be very stubborn in this area.
Ultimately, we could just simply grind sideways in this very tight range, which of course wouldn’t be much of a surprise either because we need to at the very least take a breather after the move lower, and could possibly try to build enough bearish pressure to go higher. However, if we are trying to build a bit of a base, that often will take time.
