The GBP/USD pair fell during the session on Thursday, but as you can see found support down near the 1.54 level, and bounced enough to close back above the 1.55 handle, this resulting hammer of course is a very significant sign of bullishness, as it shows how much support there really is below this area. Although not shown on the chart, it should also be noted that the 38.2% Fibonacci retracement is just below the 1.55 handle as well.
Looking at this chart, I can make a case for the market going back to the 1.5750 level on a break of the highs from the hammer, which of course is a classic technical analysis signal. After all, we broke out well above the 1.55 level, and have now come back retest it for support. Going forward, I still think that this pair will more than likely find the 1.60 handle someday, but in the meantime we could see a lot of volatility.
I just don't trust this market at the moment.
Because of the fact that I do not trust this market and think that it is also probably running on fairly low volume, I will be quick to move my stops him if I do find myself in a long position. After all, part of becoming a successful trader is keeping your trading capital somewhat intact, and that's easier said than done at the moment. The violent moves in the currency markets have indeed heard quite a few people I know, and I have to admit that I've found the recent trading very difficult to deal with at times.
Is because of that that I am going to be a little bit more cautious than usual, but looking at this chart I can also make an argument for the fact that we have fallen too far, too fast. Simply put, we are probably due for a bounce anyway, even though I believe betting against the US dollar right now is probably fairly dangerous. Because the British pound out, it does appear that there is the possibility that we could see weakness in the greenback.
