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The GBP/USD pair had a strong showing during the Thursday session as it initially fell, but bounced in order to form a very bullish candle. The 1.57 level has been overtaken again, and for the first time in five sessions, we did not pullback after breaking through. This suggests to us that we are ready to breakout in this marketplace.
However, we know that the 1.58 level is still resistive, and as such would wait until that is broken above in order to go long in this marketplace. It does appear that the market is betting on a Federal Reserve quantitative easing move, and this of course would be strong for this pair as the head of the Bank of England recently stated that monetary policy is just about where it needs to be. The interest rate differential will certainly come into play at that point in time, and as such the market should continue to be bullish.
We've been talking about this pair for some time, and have been in a very bullish attitude of it, but haven't been able five because of the overhead resistance. It looks like that level of resistance is finally ready to give way, and if it does we should see quite a move. We are looking at 1.60 handle right away, and possibly even higher.
This market simply looks like one that has been chipping away at a resistance area and the gains quite a bit during the Thursday session. It looks like the shorts have finally started to be flushed out, and this should lead to an explosive move higher. In fact, if you're extremely aggressive you can probably go ahead and buy now, but it isn't a 100% proposition at this point in time.
As for selling this market, there simply is no reason to do so at this point in time, and we would even think about it until we were below the 1.55 handle. We think that the British pound will continue to outperform many of the other currencies around the world, as money moves from Europe into the United Kingdom in a bit of a safe haven play.