The GBP/USD pair fell during the session on Thursday, but bounced off of the 1.5925 area in order to form a little bit of a hammer. This hammer is sitting right on top of the gap from the beginning of September, and as a result it doesn't surprise me to see this support show up. However, it's not a matter of simply breaking the top of the hammer, as the 1.60 level could very well be resistive.
Because of this, I am waiting for daily close above the 1.60 handle in order to start buying and holding onto the trade for any real length of time. However, I do suspect that the 1.62 level will be a bit resistive, but eventually we could breakout above there and try to head towards the 1.65 level. If we managed to get above there, that would open the door to the 1.70 area as well.
A battle of central banks.
This pair is interesting considering that the Bank of England is not in any situation where they could expand quantitative easing, so therefore the British pound is probably going to have a little bit of a bid in it automatically. That being the case, I feel that this market should go higher, especially when you consider what the Federal Reserve is looking to do. The Federal Reserve is looking to decide whether or not to taper off of quantitative easing, and as long as they do not it's very likely that the US dollar is going to struggle. That mixture should provide a boost in this market.
As for selling is concerned, it's almost impossible when you look at this chart. After all, there is that gap that the 1.5925 level, and even if that gives way there is a good chance that the 1.5750 level offered enough support to keep this market higher as well. That being the case, I feel that as we continue to pull back, looking for a supportive candle would be a very good way to get back into the markets in order to take advantage of the nice uptrend that we have.
