The GBP/USD pair fell hard during the session on Friday, mainly in reaction to the nonfarm payroll numbers coming out of Washington DC much stronger than anticipated. The market did close back above the 1.60 handle, which of course is interesting to me as the move to the US dollar wasn't quite enough to break this pair down. On top of that, the 1.5950 level looks like it did offer enough support to push the market high enough to at least make me think that this market should remain in the consolidation area that we've seen since 15 September.
The consolidation area runs from the 1.59 level on the bottom to the 1.63 level on the top. Because of this, I feel that this market is basically "stuck" at the moment, and because of that it should continue to bounce around in this general vicinity, so because of that shorter-term traders should do fairly well. That being said, I think this is probably going to be a buying opportunity, leases long as we stay above the aforementioned 1.59 handle.
To taper, or not?
The Federal Reserve now has at least one more minor reason to consider tapering off of quantitative easing, bringing down the volume of bond buying. This of course could drive up interest rates in the United States, which of course attracts investors. This could have money flowing from England to the United States, or at least back from England into the United States as a reaction to the ability to get paid a reasonable amount of yield and what's considered to be a "riskless asset."
Having said that, I do feel that this market will continue to struggle to get above the 1.63 level though, so this is a short-term trade only, as you can see we continue to bounce around in the general vicinity. However, if we get that daily close above the 1.63 handle, I am more than willing to hang onto it until we get to the 1.65 handle, which has been the target for some time. Selling is possible below the 1.5850 level, as we should fall down to the 1.55 handle.
