The GBP/USD pair had a strong showing on Thursday for the third day in a row. Considering how be of this pair had been recently, it is interesting to see that we are seeing quite a bit of a fight at this area. I have suggested several times before that the 1.58 level would be very crucial as to the future direction of this pair, simply because it is the top of the ascending triangle that had broken out last summer to send the market much higher.
We have test the top of this ascending triangle, and I find the fact that we are sitting just below the 1.59 level on nonfarm payroll Friday very interesting. With that being the case, I think that the catalyst of the jobs number could be enough to push his back above the 1.59 handle, which for my money is a strong buy signal. Alternately, we could see this pair plummet, but I would have to see a fresh new low in order to start shorting again.
Could it be simple consolidation?
In there is also the possibility that we simply consolidate around the big figure at 1.58 or so. However, I find this a bit difficult to believe as the move has been so strong of the last three days. You can see that from a week and a half ago there were three very neutral candles just above the 1.58 handle. I look at the top of these candles as the last barrier to bounce back and try to get to the top of the former consolidation area, which has 1.63 as its top. This in fact would be one of my favorite trades if we get the signal.
This pair typically is very sensitive to the nonfarm payroll numbers, and as a result will be very volatile. If you choose to be a bit more conservative, it makes sense to wait until the daily candle closes in order to see which side of 1.59 we are on. I believe that the British pound has been sold off far too much, and as a result we could see a wicked snapback.