The GBP/USD pair initially surged during the trading session on Wednesday, exactly as I would've expected. However, we also ran into trouble at the 1.63 handle which I have been talking about as significant resistance for some time now.
I believe that the 1.63 level is key for the future of this pair. With this being said, it doesn't surprise me that we failed to get above it, as it is so serious and its importance. When you look at the longer-term charts, 1.63 is in fact important, and because of that I think a breakout above that level will clear the way for move as high as 1.70 going forward.
All things being equal, I still believe in the bullishness of this pair. However, we had several headlines coming out of Washington DC involving politicians bickering about the so-called "fiscal cliff" talks going on at the moment. There is a lot of nervousness and un-ease around the markets involving this problem, and the action that we saw on Wednesday only confirms that.
1.70
I still believe that the pair goes to the 1.70 level sometime during the year 2013. However, with the shooting star that formed on Wednesday I believe that we will see a little bit of a pullback in the short-term. I am not interested in shorting this pair, because it is simply far too bullish in general. I think this will be the "pause that refreshes", and we should see significant support somewhere around the 1.61 handle as it has been important from time to time recently.
In fact, I am still bullish of this pair that I have absolutely no interest in shorting it until we managed to break down below the 1.58 level. Because of this, I will treat any supportive action as an excuse to buy this pair, and I would become even more aggressively long of this pair if we managed to break the top of the shooting star for Wednesday.
With the Federal Reserve adding to its balance sheet again, it does look like all things being equal the US dollar should continue to weaken against the British pound, a currency you has a central bank behind it that is not expanding its asset purchase programs. With this being said, I believe this pair will continue higher, and remain bullish of it for the long term.