The GBP/USD bulls have only tasted defeat 6 out of 21 trading days in May and are starting June off with some steam in its stride climbing 330+pips since market open on Sunday. Now that it has taken out the 1.6000 barrier with Tyson-like KO power, the 1.6500 big figure is looking to fall pretty easily.
Taking a look at the chart below, notice how the daily close is near the highs being only off the peak by 15%. This, combined with the fact that the pair has not seen a daily close below the Tenkan-sen (white line) since April 28th suggests we are all bullish on this pair until a reversal pattern shows up.
Momentum is at its peak and is continually carving out new fresh yearly highs thus according to Momentum models, peaks in momentum are rarely ever peaks in the trend. CCI is also still in trend mode with 24 consecutive bars in positive territory and 19 of them being above the 100 reading suggesting this trend has some thoroughbred legs behind it. We suggest waiting for the next inside bar for a breakout move or waiting for a daily close above 1.6500 to set new longs. A reversal pattern at 6500 is possible and this momentum pattern has shown up in exhaustive moves before but until the candles show different, we are only looking for longs.
The only real technical resistance is at 1.6681 which is the Oct. 08 swing high and the 50% fib of the entire down move from 2.0152 clocking in at 1.6845. Beyond that, the skies look clear until 1.7000.
Chris Capre is the Founder of Second Skies LLC which specializes in Trading Systems, Private Mentoring and Advisory services. He has worked for one of the largest retail brokers in the FX market (FXCM) and is now the Fund Manager for White Knight Investments (www.whiteknightfxi.com/index.html). For more information about his services or his company, visit www.2ndskies.com.