The GBP/USD pair fell during the session on Tuesday, but found enough support below the 1.66 level in order to turn back around and form a hammer. The hammer of course suggests to me that we are going to continue to consolidate just above, and as a result could go as high as the 1.68 level. I also think we could go higher than that, but right now it appears that the market is very comfortable going sideways, so this is more or less a short-term set up as far as I can tell. Nonetheless, I do see the ability to make some money to the upside, and as a result would be willing to take the trade on a break above the hammer.
Even if we fell from here, there is plenty of support all the way down to the 1.65 level. Because of this, I am a bit concerned about shorting, and therefore will avoid doing so. On top of that, I see plenty of noise all the way down to the 1.63 handle, so it makes me feel that this is a “buy only” pair.
Ultimately, I see the 1.70 level as being the target.
I believe that ultimately we will go to the 1.70 level, but it will be more or less a choppy affair until we get above the 1.68 handle. There is a lot between here and there that could happen obviously, but ultimately the pair breaking above the 1.65 level was fairly significant on a longer-term perspective. With that being the case, I believe that if you are more of a longer-term trader that could be the potential set up that you’re looking for.
I believe that buying small positions over and over is probably the best way to go with this market. Because sooner or later you will go higher and be able to enjoy the eventual move higher. The pullbacks going forward really won’t matter to me until we break down below the 1.63 level. With that being said, I believe that this summer should be really good for the British pound, and considering how well it has done against many other currencies, it does not surprise me that we are taking a little bit of a breather here.
