The GBP/USD pair initially fell during the month of January, but as you can see spent quite a bit of time trying to gain support. It appears that the 1.65 level now offers enough support to become a potential buying zone, as the monthly candle is starting to turn into a hammer. This of course would be very positive, and still fall within the realm of the market heading towards the 1.70 level.
This is where I think the markets been trying to get to for some time, and the fact that we just simply cannot sell off with any significant strength in an environment that features a stronger US dollar tells me that the British pound should continue to strengthen overall. Granted, this is probably the pair were we will see it strength in the slowest, but it should do it.
1.70 will be significant resistance.
I still believe that the 1.70 will be targeted, but I also believe that it will be significant resistance. However, if we can get above that level this market could really start to take off at that point. I would suggest that the 1.80 level would be targeted next from a longer-term standpoint, and we could probably go as high as 2.00 over the course of the next several months, if not years. After all, when you look at the monthly chart, you can see just how sideways this market has been for some time.
Markets don’t like to go sideways forever, and we have essentially been consolidating for about five years at this point. This is a market that has to be building up massive inertia by doing so, and as a result we may eventually get that breakout that leads to the type of trading action that was so common when it first started trading Forex, as the cable was a very reliable long-term buy with a decent trajectory. Nonetheless, I believe that the month of February should be fairly good to the British pound, I don’t know that we will get above the 1.70 level during it though.
