The GBP/USD pair gapped higher at the open on Monday, but fell apart later in the day. In fact, I was bit surprised to see how much. The market pullback although we were at the top of what could be seen as relatively obvious consolidation. The resistance area at the 1.6250 level has been tested several times since summer, and each time it has proven to be strong enough to keep the buyers away.
Even though this is the top of the obvious consolidation, I am a bit hesitant to start selling based upon the clustering that I see the 1.61 level that could offer support. After all, this market has plenty of clusters below, and we have to keep in mind that the market was going higher before this consolidation started. Is because of that that I feel this is simply a rest on the way to higher levels. After all, the British pound in general has done quite well around the Forex markets. While the US dollar of course has been relatively strong, the fact of the matter is that the British pound has been really favored.
Looking for support.
Based upon the previous uptrend, and the fact that it was so strong, I feel that eventually we are breaking out to the upside. With that being the case, I am looking for some type of supportive candle between here and 1.60 handle in order to start buying. Given enough time, I believe that the British pound will become one of the favored currencies, based upon the fact that the Bank of England looks like it's essentially stuck with its monetary policy, and possible tightening for that matter, given enough time.
For forward, I expect a break of the 1.6250 level to lead to the 1.65 level, and possibly even farther. Although I would anticipate 1.65 to cause a little bit of resistance. If we pullback, I think it will simply be an attempt by the market to find enough buyers to build up momentum that would break above the resistance area, and send the market higher.
