The British pound gapped higher at the open on Monday, initially reaching towards the 152.25 handle. We pulled back a bit and towards the 151.50 level, where we find buyers yet again. By reaching to a fresh, new high, we have tested the 153 level above, which is the recent high on the weekly chart. The fact that we formed a shooting star on the hourly chart is a negative sign, but it appears that we are not ready to pull back significantly. Because of this, I believe that we will eventually break above the top of that shooting star, and by extension the 153 handle, and that of course is a sign to start buying again. The next significant level would be the 155 handle, as it is a large, round, psychologically significant number. However, structurally we look quite a bit different. On a breakout, we could go as high as 160 over the next several weeks. In other words, a break above the 153 level for a significant amount of time could be a “buy-and-hold” trade.
That being said, it’s likely that we could find a pullback in the short term if for no other reason than to build up enough momentum to go higher. The 151-level underneath should be a floor at the moment, because it was the scene of the gap. If we can stay above that level, I remain bullish of this pair, but I also recognize that it will be noisy yet again, as it typically is. Longer-term though, I do think that we rally and break out for a large move.
GBP/JPY Video 05.12.17
This article was originally posted on FX Empire