By: Christopher Lewis
The cable pair has been absolutely whacked since the 1.60 level turned around the buyers. The Federal Reserve released minutes that made no real suggestion of quantitative easing going forward, and the Dollar gained against most other currencies as a result. This pair was of course no different.
The action on Wednesday saw the bears step up the pressure, but at the end of the session it appears that the bulls have stepped back in to push prices back up. In fact, the pair formed a hammer on the daily close, and just above the 1.58 level – right where the 200 day EMA steps into the picture.
While I am somewhat hesitant to go against the US Dollar at this point, perhaps this pair is the exception? The technical setup certainly would suggest so, and it should be said that the Pound is doing fairly well against many of the other major currencies – with the Euro being the most obvious one.
Hammer, 200 day, and support
I really can’t tell you a reason why I would want to sell the US Dollar at the moment, but I cannot ignore this chart. It simply looks far too bullish to ignore at this point in time. The pair is sensitive to risk appetite, and that is also why I find it odd that it is rising back to the opening price for the Wednesday session. However, I simply cannot argue – the signs of bullish are there, and at the end of the day, the market is always right.
The 200 day EMA is just below, and sitting on top of the 1.58 handle. This level has been supportive over time, so a bounce form here isn’t a big surprise. The hammer candle is also a strong signal as well, and at this point in time I have to say I am expecting another run at the 1.60 level.
.png "GBP/USD Daily 4/5/12")
On a break to the highs for the Wednesday session, I would be long this pair and aiming for the 1.60 level. ON a break of the lows from the session, I would be short of this pair, and aiming for 1.5650 or so.