The GBP/USD pair initially fell during the session on Tuesday, dipping below the 1.53 handle. However, somewhere near the 1.5250 level, we had enough support to turn things back around and form a nice-looking hammer. This is a bit of a tricky currency pair the moment, but I believe that Occam’s razor is probably the best policy to follow right now: what is the simplest explanation is probably the one you should accept. In other words, I believe that we are simply consolidating, probably heading back towards the 1.54 level, and then the 1.55 level. I think that the 1.52 level below is massively supportive, and as long as we can stay above there I think it’s only a matter of time before we go up to test the 1.55 resistance.
Let us not forget, this pair did break out rather significantly recently, and the pullback although strong, really didn’t like any of that out. I believe that the British pound will continue to strengthen as people are starting to look for some type of value in the currency markets, as the US dollar has been purchased for so long.
1.55, and then 1.58 and beyond
I believe that we go to the 1.55 level as a stated above, but I also believe that we go above there and reach for the 1.58 handle. Once we get above that level it becomes a “buy-and-hold” type of situation as the trend certainly would favor a longer-term position in this market. I think we would go to the 1.60 level and to levels well beyond that. After all, it wasn’t to awfully long ago where we were trading near the 2.0000 level. Yes, I know a lot of you out there will not have been trading then, but the currency was very comfortable near the 1.75 level and above. While it seems like a real stretch from here for those of you who weren’t around back then, it was very comfortable for a very long time. I am bullish of this pair until we break down below the 1.52 handle.
