The GBP/USD pair broke higher during the course of the session on Wednesday, as we tested the 1.55 level during the day. With this, I feel it’s only a matter time before we break out and above that level, but as it is resistance I would expect a little bit of a pullback. Ultimately, the pair will probably trying to test the bottom of the uptrend line that we had recently had in this market over the course of the summer, and as a result I feel that the market will find a bit of resistance there as well. Because of this, although I am bullish of this pair I recognize that it may not be as straightforward as one would think based upon the candle from the Wednesday session. I think that as we pulled back, there will be interest because of the massive bullish candle that we had formed during the day on Wednesday. After all, a lot of traders are probably sitting there wondering when they can get involved again. This market certainly looks like it has a lot of bullish momentum, and that of course won’t be much of a surprise when we bounce after a pullback.
US dollar weakness
I believe that a lot of this is probably based upon the US dollar more than anything else. Because of this, I think eventually the overall softness of the British pound will come back, and although this pair will probably continue to go higher, it may underperform other such pairs as the EUR/USD. After all, the best thing that the British pound has going for it is that it is not the US dollar.
At this point in time, I don’t really have an opportunity in front of me to sell this pair as far as I can see, and with that I feel that this is essentially going to be a “buy only” market going forward.
