The British Pound closed sharply higher against the U.S. Dollar this week, putting the currency on the bullish side of a Fibonacci retracement level at 1.6089 and setting up a potential test of a downtrending Gann angle at 1.6258. Traders should look for an acceleration to the upside once the 1.6165 swing top from the week-ending November 4 is violated.

James A. Hyerczyk Forex, Futures & Equity Analyst

Last week the British Pound rallied after minutes from the Bank of England’s latest meeting showed the central bank was less inclined to expand its bond-buying program. In addition, data showing an unexpected decline in the U.K.employment rate to 8.3% from 8.4% also drove up demand for theSterling. The British Pound received its final boost for the week on Friday after British retail sales volumes rose a stronger than expected 1.8% in March according to the U.K. Office for National Statistics.

The strength in the British Pound is a sign that near-term expansion of the bond-buying program is unlikely, however, the program has not been fully eliminated and may be reignited later in the year if demand becomes weak. Traders should also keep in mind that sovereign debt issues on the Euro Zone remain an active threat to the U.K.economy.

Traders should watch for profit-taking following the initial test of the Gann angle resistance at 1.6258. Any weakness should not be perceived as trend changing, however, a closing price reversal top on either the daily or weekly charts will be a sign that the selling is greater than the buying at current price levels.

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