By: DailyForex.com
The GBP/USD pair had a rough and tumble day during the Wednesday session, as we initially broke down below the 1.25 support level which of course was a very bearish sign that I had pointed out the possibility of recently. However, we couldn't close below that level, so no truth selling signal was fired off. Instead of that, we got a very neutral looking candle that could be best described as a longlegged doji. This is a very neutral turn of events as the range was significantly wide for the session on Wednesday, and the fact that we couldn't get anywhere certainly suggests that there is a lot of indecision out there.
The United Kingdom had recently announced that its GDP was positive, and that's what started the surge from this area up to the 1.56 handle. However, that GDP reading was something akin to 0.1%, which is barely breathing. This might've been a bit of an overreaction, and as a result the market has sold back off. Now the real money players could be coming into the market in deciding which direction this currency pair goes.
Play the breakout
The best thing about this candle is that it's so simple to trade. If we manage to break out of the range to the upside, this would of course be a bullish sign and we would start buying at that point. If that happens, we would expect to try to reach the 1.55 handle that would most certainly be a bit of a bumpy ride to that level. However, it is possible that we could see the market break down below the lows from the Wednesday session. If that happens, we believe that the 1.50 level will be targeted next, and that the US dollar should continue to strengthen against most other currencies.
Either way, I believe that this market will show its true colors over the course of the next 24 to 36 hours. I am simply waiting for that breakout in either direction, and just trading with the overall movement of the market.
