The GBP/USD pair shot straight up during the session on Tuesday to continue the bullishness that we've seen since the middle of November. I would remind you that the pair had initially broken out of an ascending triangle over the summer that had resistance at the 1.58 level as the site of the original breakout.
During the early part of November, we pulled back to the 1.58 level it retested that area as significant support. As you can see on this chart, we have shot straight up since. The ascending triangle had initially suggested that we would see a move to the 1.63 level, and that's exactly where we topped the charts during the summer.
Now that we have fallen from that level, and bounce back, I believe that the 1.63 level is the next major hurdle to overcome. If we break above that level, I would not only be long of this pair, but be willing to hold onto a trade until we hit the 1.70 level. This is exactly what I am expecting, and think that level will be targeted sometime during 2013.
Pullbacks are welcome
Every time this pair pulls back in the future, I will be very interested in buying. I will look for signs of support at round numbers, and simply buy over and over. I believe that the 1.60 level will serve as a floor for the market going forward, and I find it difficult to believe that we will break through anytime soon.
However, you have to keep in mind that we are at the very end of the year and the conditions will be somewhat ill liquid. Because of this, headline shocks will not only move the market, but will move them much quicker than usual. This will be especially true as we get towards the end of this week.
I believe that once the 1.63 level is broken to the upside, this pair will begin a relentless march higher. I don't really have a scenario where I want to start selling, at least until we get below the 1.58 level. That looks very unlikely at this point time, and with the Federal Reserve looking to expand its balance sheet, I believe that the US dollar will be weakened over the course of 2013 and possibly beyond.