So my 1st full week back in the markets was treated by a long-awaited breakout in the $GBPUSD.
The breakout above 1.58 to 1.5900 still needed confirmation. We have been faked out by cable’s breakouts before. But this week’s breakout actually looks for real.
1. The Fed
The Federal Reserve has been very vocal about adding another round of QE to the markets. The Fed meeting minutes released this week confirmed this. In fact, during Friday’s session, a letter from Bernanke hit the newswires. This letter confirmed and justified more QE from the Fed Chairman himself. QE is always dovish and the USD has taken a hit every time the market anticipates any QE from the Fed. This time is no exception.
1.5800 has been a very key level for the past year. Whether price is trading above and finding support or trading below and finding resistance, action around this price level has been historically indicative of further direction. To close the week above 1.5800 is a very bullish technical signal from the $GBPUSD.
Last week, I was very skeptical of cable’s rise. Even as it staged a breakout, sterling’s fundamentals kept me wary. However, now that we have had technical confirmation with this bullish weekly close, I trust the charts to support this breakout back towards 1.6000. The only thing that changes this bullish view this week is a daily (or weekly) close below 1.5750. Trade what you see!