The GBP/USD pair went back and forth during the session on Tuesday, slamming into the 1.60 handle but finding it to be far too resistive. On the other hand, the 1.5950 level offered support as well, and because of that we formed a nice looking hammer by the end of the day. What I find most interesting is that we have support down below in the form of the gap from roughly one month ago. Above that, we have the 1.60 handle, which is an obvious place to see trading action as it is a large round psychologically significant number.
That being said, if we can break the top of the hammer from the session on Tuesday, I believe that this market will eventually head towards the 1.62 handle, and then possibly even 1.65, as it is the most likely major level that we would see after the breakout.
It still about tapering
I still believe that a lot of the United States dollars’ worth will be determined on whether or not the Federal Reserve can taper off of quantitative easing. I hate saying this yet again, but at the end of the day it seems to be what the markets are focusing on. That being the case, as soon as we get the nonfarm payroll numbers I believe that we could get a little bit of clarity, albeit just for the short term. I also think that the markets will be very choppy and rough, and that makes perfect sense as there is so much uncertainty.
If we did manage to break above the highs from the session on Tuesday, I believe that it will take a little bit of wherewithal to hang onto the trade for a significant amount of time. Do not expect this market to go higher and aim towards the 1.62 handle with a clean break, rather expect a lot of volatility between here and there.
On the other hand, if we did breakdown at this point in time, I still believe that the 1.5750 level could very well be supportive as well. Because of this, I am only buying the British pound going forward.
