The GBP/USD pair has been very bullish over the last six months or so. That being said, as we approach the 1.65 region, the pair has lost quite a bit of momentum. The question now becomes whether or not it is simply traders taking their profit before the holidays, or if it is something a bit more significant. I personally believe that is probably a little bit of both, as the number is a large round figure, but also a lot of professional traders are going to want to show profits at the end of the year for the clients. Thereby, they have to close other positions that are very profitable.
Looking at this chart though, you can see that there have been several shooting stars in the area of the 1.64 handle. Because of this, I think that January may see a little bit of a pullback in this pair, but there is more than enough noise right around 1.61 to keep this market afloat. The British pound itself still looks very strong, but I have to admit that there are several charts where it is a bit on the parabolic side. Because of this, I believe that we may see the British pound week in a bid in January overall, but this will simply be a pullback in a longer-term uptrend for this currency overall.
The jobs numbers
Naturally, the jobs numbers out of the United States would be very important again this month. The whole world wonders whether or not the Federal Reserve can continue to taper off of quantitative easing, and if they do that is a huge deal. I suspect that they aren’t ready to do it for a while, and therefore this should give the British pound the ability to stretch its legs a little bit over the longer term. However, I fully expect to see the pullback in the beginning part of the month still. That area are around the 1.61 handle should show enough support in order for this market to break out to the upside eventually. Expect a bit of a grind, but I believe the British pound will continue higher, given enough time.
