By: Christopher Lewis
GBP/USD fell on Friday as the Non-Farm Payroll numbers for the month of April out of the United States disappointed. The markets were expecting as much as 165,000 jobs added, but only got an addition of 115,000. The failure to add more workers certainly put a damper on bullish bets in the various stock markets, and the riskier currencies also suffered.
The cable pair will typically move with stock markets, but the relationship has actually broken down a bit lately. The markets seem to be focusing on the possibility of inflation in the United Kingdom, which down the road could lead to higher rates, but the reality is that the pair is rising, and that is all that matters at the end of the day.
The recent action has been extremely bullish, but the last week has seen a bit of a pullback. Truth be known, the pullback was desperately needed as the market was certainly overbought since the breakout.
1.60 is my floor
As long as 1.60 isn’t violated, I still feel this pair is a buy, not a sell. I understand that there seems to be a “risk off” mood at the moment, but this pair has broken the typical relationships and has taken on a life of its own. Ours is not to question, but to do. In other words, if the market is going up – that is all that matters. Arguing with “unreasonable moves” is a sure way to blow your account.
The 1.6150 level looks very supportive at the moment based upon the hammer at this level. Also, from a historical perspective, there have been a lot of reactions in price at this level. With this in mind, and the strength that the Pound has shown overall, I am looking for some kind of supportive candle to go long on in this area.
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The selling of this pair isn’t possible even though the normal rules would suggest it. The Pound has been one of the strongest currencies lately, and I am not in the mind to stand in its way. O f I choose to go long the Dollar – it won’t be against the Pound.