Nick Nasad
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GBP/USD - Wedge Broken to Topside, Setting Up Important Test of Post-FOMC High at 1.6160

The GBP/USD had been setting up in a wedge pattern, over the last week, after its strong 3-week rally. As the week comes to an end, the GBP has managed to puncture the resistance trend-line in the pattern and use it (along with the 1.6095 pivot) as support.

  • This sets up the possibility that the GBP is getting ready for continuation of its 3-week rally, however, it first has to content with the post-FOMC 1.6160 high, which sets up as the key resistance pivot level.
  • If price action falls before testing those highs, then we can still use the upward sloping support trend-line from the pattern, along with the 55-EMA (which is in confluence), to look for bounces.
  • However, if the rejection of 1.6160 shows strong price action behind it, and momentum swings back to the USD, then we need to consider the possibility of a topping action as well.

Overall, the price action yesterday gives the GBP the advantage which goes with the general trend in this pair over the last month. The concern is that a medium term top could still be put in as the forex markets decide how to respond to the "no taper" FOMC decision. I'm generally leaning to the bullish side though, as the GBP macro data has been surprising to the upside, while in the US the chance of no tapering till later is becoming more probable.

- Nick

You can see the current price action in the GBP/USD by clicking below: