The GBP/USD pair rally during the session on Tuesday as the 1.60 level continues to hold as a "floor" in this market. I believe that the Bank of England should continue to push rates higher through its lack of monetary policy expansion. Whether or not this is their intent really doesn't matter as the Federal Reserve is working so hard to devalue the US dollar.
We recently saw an ascending triangle form in this currency pair that had a massive amount of resistance between the 1.57 and 1.58 levels. Once we broke out above that, we were certainly in a new phase of a bull market. The market raced to the 1.63 level, which of course was the target suggested by the ascending triangle, and as such the move was "fulfilled." However, the break was so significant that I still believe that we will go much higher.
The 1.63 level will of course be resistance again once we reach it again, but breaking through it should signal the next move higher. I personally believe that we will see a 1.70 level print by the end of next year, and as such I am currently buying dips in this market. As long as the Federal Reserve continues to ease its monetary policy and this is something that we know that the plan on going until at least 2014, there is little chance that the US dollar will gain against the British pound for any meaningful length of time.
The shooting star was the key
The shooting star that was formed at the 1.60 level been broken to the upside was the crucial chance that this pair was going higher. I do believe that the 1.63 level will cause a lot of problems, but eventually will give way. The 1.65 level above is certainly an area where we could see a bit of resistance as well, but looking at the longer-term charts it seems to be minor resistance. It's because of this that I firmly believe that we will go much higher, but we will see the occasional hiccup as we are in a very uncertain time and runs to the US dollar could happen occasionally.
