The British pound initially pulled back during the trading session on Tuesday but found enough buyers to turn around and send this market higher. By breaking the top of the inverted hammer from the previous session, this is a very bullish sign, but we obviously have a lot of resistance just above, especially near the 1.25 handle. This is a significant level because it is a large, round, psychologically significant figure. If we can break above that level, it’s very likely that the British pound should continue to go much higher. In fact, that would be an extraordinarily bullish sign as it would also break the top of a bullish flag.
GBP/USD Video 08.04.20
To the downside, if we were to break down below the lows of the trading session from Tuesday it would in fact be a very negative sign. Quite frankly, at one point it looks like the market with the going to break down and go looking towards the 1.20 level underneath. That is an area that is logically supportive due to the large, round, psychological importance of the round number. All things being equal, if we were to break above the top of the potential bullish flag, we could be looking at a move towards the 1.35 level eventually, which would obviously be very bullish and very “risk on.” This doesn’t mean that it would happen overnight, because clearly there will be a lot of headlines between here and there that could cause a lot of chaos. At this point, a break above the 1.25 level means that you should be buying dips.
This article was originally posted on FX Empire
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