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GBP/USD had a very volatile five sessions this previous week as we went from positive to negative several times. We are still above the crucial 1.60 level, and as such we think that this market is still bullish overall. The Bank of England continues to hold its rate at current levels, while the Federal Reserve is more than happy to crush the value of the US dollar.
With the recent breakout of the ascending triangle from this past summer, we had anticipated a move to 1.63. We think that ultimately this currency pair will get above that level, but a pullback is exactly what's needed when we have traveled so far in such a short amount of time. Because of this, we are looking for some type of supportive action, especially if we can get down to the 1.60 level. We have actually no plans of selling this currency pair at the moment, and certainly don't see doing it on the longer-term charts as there is a taunt of support between 1.57 and 1.58 now.
Over time, the US dollar will continue to suffer as the Federal Reserve continues to prime the markets and the value. It's hard to imagine a scenario where "risk assets" don't gain in value as the Federal Reserve floods the markets with liquidity. Because of this, we do favor the British pound in general as it is considered to be a "risk" currency and of course the above mentioned Bank of England attitude.
We do think however that the market could pullback. We even could pull back as far as the 1.58 level. It isn't until we get below 1.57 that we are concerned, as that would of course show we are reentering the previous ascending triangle. This of course would change her attitude of the market altogether, but in reality we think this impulsive move that we have seen over the last several weeks should be a sign of things to, as the British pound continues higher. In fact, the currency looks good against most other currencies, not just the US dollar and therefore we do anticipate higher British pound rates.