The GBP/USD pair had a relatively calm session during Monday, after bouncing off of the 1.60 handle last week. This area is one of interest to me, as it is a "large round psychological important number." Traders love to please their positions based upon these large numbers, and as such it is absolutely no surprise to me that we saw a reaction as we approached it.
Also of interest is the fact that we can draw a Fibonacci retracement level from the breakout of the ascending triangle this summer to the highs, which of course sets the 50% Fibonacci level at the 1.60 handle. With that kind of confluence, you are always going to have traders willing to step up.
The Bank of England of course is keeping its monetary rates steady, and has absolutely no plans on easing either a traditional or exotic route. This of course contrasts starkly from the Federal Reserve and its plans, which of course involves buying bonds and making purchases in the MBS markets.
1.60 is the key, and makes this a binary trade
As long as we are above the 1.60 handle, I am buying this pair only. I believe that supportive candle should all lead to higher levels, and I also believe that the 1.63 level will be revisited again. I also believe that we will eventually break the 1.63 level, and go much higher. In fact, I would suspect that by this time next year we will have hit the 1.70 handle.
If we do manage to break the 1.60 level, I am not willing to sell this pair until we go below the 1.57 handle, as it was the beginning of the resistance that kept the descending triangle from rising until its recent breakout. This would be a simple matter of what should be support giving way, and of course I think that would lead to much lower pricing. But until that happens, I see no reason to sell the British pound. In fact, if I do choose to sell the British pound it won't be against the US dollar, but other such currencies as the Swiss franc.