GBP/USD forecast for the week of February 15, 2016, Technical Analysis

The GBP/USD pair initially fell during the course the week, then turned back around to form a bit of a hammer. The hammer of course is a bullish sign, so I feel that the market is going to continue to rally, and that we could go as high as the 1.48 level in the short-term. We could even go as high as 1.50 level, but the one thing that we have to question is whether or not the US dollar has already seen the highs. After all, Janet Yellen has suggested that the Federal Reserve cannot raise interest rates anytime soon, and that was part of what was driving the Forex market into the arms of the US dollar.

Ultimately though, you also have to keep in mind that there is a lot of uncertainty out there, so that does tend to put a bit of a natural bid in for the US dollar. This point in time though, it looks as if the market will rally because it looks as if the buyers continue to enter this market again and again. Ultimately though, we do recognize that there is a lot of noise above, especially once you get above the 1.50 handle so at this point in time while we are bullish, we also recognize that this run will only be for so long

If we break down below the bottom of the hammer, it’s very likely that the market will continue to go lower, and that would be extraordinarily bearish. The 1.40 level below is a bit of a floor, but ultimately we could go below there if there is a lot of concern around the world or some type of headline shock. However, the charts suggest that we are going to see strength so this would be more or less a bit of an outlier order reaction to something going on as far as economic announcements or some type of shock. Ultimately, this is a market that will be volatile regardless what happens, and therefore you will have to be careful and keep your position size somewhat small.