Over the past several months, the sterling/dollar pair has been swinging up and down within the confines of a trading range between 1.2100 and 1.2770.

However, there is a key level of support dividing this range, right through the 1.2400 area, and recently, the price has been testing this level and remaining buoyant above it. As shown in the chart below, the price dipped below that level initially, before reversing and ending the day higher, forming a reversal bar known as a pin bar reversal.

This price action pattern indicates that lower prices were rejected and that prices could continue higher from here. Given the key support level at which this pin bar formed, it has plenty of "weight" behind it, and so there is strong potential for prices to push higher and retest the highs near 1.2700 to 1.2770 in the coming days.

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