The GBP/USD pair rose during the session on Tuesday, breaking back above the 1.60 level, an area that I have been watching for some time now. There is a band of support all the way down to the 1.59 level, and as a result I believe that this market is going to continue to consolidate between there, and the 1.6250 level. That being the case, a break of the highs from the Tuesday session signals to me that the market is in fact going to try and reach the top of that consolidation area. As a result, I would be buying this pair above the highs from the Tuesday session, and probably taking profits at about 1.62 or so.
The US dollar continues to get beaten-down, and as a result it makes sense that this pair should continue to go higher. If it does, I think that the market will eventually break to the upside, but for the meantime it wouldn't surprise me at all to see this market stay in this consolidation area. After all, there is no real catalyst one direction or the other at the moment, so it makes sense of the market simply takes a breather. However, this is a market that will be based more upon what's going on with the Dollar than anything else.
Resting before the next leg higher.
Typically, when you see consolidation like this it is simply the market taking a breather before going higher. After all, consolidation normally turns into continuation. I see the markets punishing the Dollar for some time now, because quite frankly I do not think that the jobs market is getting any better in the United States. With that, the Federal Reserve will continue to pump money into the marketplace buying bonds, which of course will drive down yields in the United States. This of course has money looking for higher yields in other countries. The yields in the United Kingdom certainly will continue to be higher, and this will not be heard at all by the fact that their greatest trading partner the European Union, has recently exited a recession. That being the case, the Pound should continue to appreciate against the Dollar.
