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The GBP/USD pair had a fairly wild ride on Wednesday, as it both rose and fell during the trading session. By the time it was all said and done, the market had finished in a fairly neutral manner. The most important thing to notice though is the fact that we are above the 1.58 support level. This area, which extends all the way down to the 1.57 level, is the resistance from the previous ascending triangle that we had been watching for so long. Because of that, this area looks like it is currently being retested for support - something that is classic technical analysis.
Mervyn King, the head of the Bank of England recently was stated as thinking that the monetary policy in Britain was just about where it needed to be. On the other hand, the market thinks that the Federal Reserve is about to start quantitative easing yet again. This of course will drive more money into the Pound relative to the Dollar, and it makes sense that we would continue to rise in this pair.
The ascending triangle measured a move up to the 1.63 handle, and so far we don't see anything that suggests that the level isn't attainable. It doesn't necessarily mean that this will be a straight and a clear shot straight up, but that the overall trend should be higher. With this being said, we do like buying this pair on a breakout above the top of the Wednesday range.
It isn't until we break well below the 1.57 level that we begin to think about selling this pair. Is because below that level is where we will have officially had a "false breakout" from the triangle, which of course is a very negative event. If that happens, we think that this pair could revisit the 1.5250 level by the time it's all said and done. However, in all actuality it does look that the upside is the path of least resistance. We will be buying on a break of the Wednesday highs, and supportive candles down to the 1.57 level.