The GBP/USD pair initially fell during the day on Friday, but found enough support at the 1.54 level to turn things back around and form a bit of a hammer. The hammer suggests that we are going to go higher, but at this point in time there are serious resistance barriers above that could keep this market lower. Keep in mind that the 1.55 level is a large, round, psychologically significant number that could cause a bit of a reaction. On top of that, there is an uptrend line that has previously been supportive, and the fact that we broke down below there should mean that the former uptrend line should now be massively resistive. Any type of resistive candle in this area would be reason enough for me to start selling at this point in time.

Interest-rate decision this week

Having said that, the Federal Reserve does have an interest rate decision coming up this week, and the statement of course could move the markets drastically. After all, if the Federal Reserve cannot raise interest rates it’s very likely that the US dollar will fall in value. If we break down below the bottom of the hammer for the Friday session however, we should be able to break out all the way to the 1.52 level given enough time.

That being said, it does look like the market is trying to bet against the Federal Reserve, so a break out to the upside is possible. If we break above the top of the uptrend line we could very easily find this market reaching towards the 1.58 level if the Federal Reserve disappoints the markets in general. Ultimately though, I think this week will determine where we go over the next several weeks if not months in this particular currency pair as well as many others. With that, expect a lot of volatility but I think sooner or later we will get clarity that should be easy to trade.

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