- The cable rallied a bit during the trading session on Friday to break above the crucial 1.27 level.
- However, we have seen a little bit of pushback.
- So, this is what I call a holding pattern in the Forex world. We've broken out. And once you see this candlestick alarm bells should be ringing because we now see that there is a significant amount of resistance above.
So, it'll be interesting to see if we can go higher from here. If we can sustain and move above the top of this candlestick, then I think you do have a rally just waiting to happen, probably for about another 125 pips, maybe 150 pips from there. On the other hand, if we break down from here, that just tells me we've got more work to do in this range between 1.25 and 1.27.
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Risk Appetite?
All things being equal, a lot of this will come down to risk appetite because the US dollar is considered to be a safety currency. The British pound, while not necessarily the riskiest currency in the world, is considered to be a little further out on the spectrum. Interest rate differential is negligible between the United States and Great Britain. So, I don't even think that comes into the picture. The pound has been a little bit more resilient against the greenback than many other currencies.
I watch this GBP/USD pair a lot just because it gives me an idea as to how the US dollar is doing because if it can squash the British pound, it'll do a number on several other currencies, perhaps even currencies like the Japanese yen. So, I'm watching very closely. It's a bit of a binary setup. We'll just have to see how this plays out. If we break higher, we go higher. If we break down below the bottom of the candlestick we continue to see more back and forth.
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