Optimism over a possible breakthrough in the debt restructuring negotiations with Greece sent the Euro higher overnight leading to spillover strength in the March British Pound. Coupled with the news that U.K. consumer confidence rose to the highest level in seven months in January, the British Pound soared to the upside during the European trading session. Due to its strength, traders are anticipating a higher U.S. opening.
Technically, after three days of sideways trading, the March British Pound succumbed to the threat of impending volatility and surged above a key 50 percent price level at 1.5671. The upside momentum was so strong that the market continued the rally until it tested the 61.8 percent retracement level at 1.5777. Not only is the market breaking out over the Fibonacci retracement level, but it is also taking out a pair of former swing tops from November and December at 1.5758 and 1.5761. This move further supports the idea that the main trend has turned to up on the daily chart.
Now that a firm uptrend has been established for the day, traders should watch for at test of the downtrending Gann angle at 1.5805. If the market can maintain its strong upside momentum, then traders should start to plan for a possible attack of the slow-moving downtrending Gann angle at 1.5963.
Since the market is trading on the bullish side of a key 50 percent price, then traders should look for support to form at 1.5671. In addition, the market has also been walking up a steep uptrending Gann angle since bottoming at 1.5222. This angle moves to 1.5702 today. As long as the British Pound can maintain its current upside pace of about .004 pips per day then traders should consider it to be in a position to move higher. The first break of this Gann angle will be a sign that momentum is shifting to the downside.
