GBP/USD forecast for the week of December 17, 2012, Technical Analysis

The GBP/USD pair shot straight up during the week as we busted through the top of the shooting star that we formed the previous week. The market closed just above the 1.6150 level, and then managed to even close the very top of the range. Because of this, and the fact that this area has offered a bit of resistance previously, we think that a move above the highs from the week should signal a run to the 1.63 handle in relatively short order.

It is at 1.63 that things get really interesting. If we can get above that, we should start grinding our way higher to our ultimate target, 1.70 or sell. We think this level could be hit sometime next year, and as a result we are very bullish of this pair. In fact, we have absolutely no interest in selling it, and the break through that we solve this week of the top of the shooting star from the previous week only reinforces that attitude.

I do believe that the 1.63 level will offer quite a bit of resistance, but it should be noted that if you look at the two times that we have hit the 1.63 handle, the second time we have pullback but not as far as we did the first time. In other words, the lows are getting higher, and this is the very essence of an uptrend.

We believe that this is more of an anti-Dollar play than a pro-Pound play. Although we have no quarrel with the British pound, it does appear that the Federal Reserve and its expansion of quantitative easing will in fact have an effect on the value the US dollar going forward. After all, right now the Bank of England does not looks set to continue or expand beyond what is already known in the realm of quantitative easing, while the Federal Reserve seems to only be ready to add to an already expensive balance sheet. This course will drill the value of the Dollar lower, and we believe that this is now a long-term trade, and will be a long-term buy-and-hold trade if we can get above 1.63 sometime on a weekly close.