In a post last week on the GBP/USD I suggested that a break beyond the key resistance level in the 1.5600 region could provide the platform of support for Cable, and further bullish momentum for the pair, and in the last few days, this is precisely what has happened. The significant day was Tuesday, with the wide spread up candle, breaking beyond the green dotted line of resistance, just below the 1.5600 area, and closing the session at 1.5644, well beyond this area, which has now become a defined platform for support for a further move higher. This breakout was accompanied with strong volume, a positive signal that this is a true move higher, and not a fake out. In other words the market makers are participating.
This price region is also well delineated on the volume at price indicator, adding further support, and with the balance of price action in this region now positive, the outlook for the short to medium term remains bullish. However, for this trend to continue, volumes need to remain high on the daily chart, and with some deep congestion now ahead in the 1.5750 to 1.5900 area, any move higher needs to be supported with strong and rising volume. Whilst this was the case on Monday and Tuesday, yesterday’s volumes fell, and whilst associated with a narrow spread up candle, this suggests a possible pause at this level, and even a minor pullback. However, with the platform of support now in place below, any minor pullback should be rebuffed and the bullish momentum continue for Cable and other major currency pairs.
By Anna Coulling