The British pound rallied a bit during the day on Friday, breaking above the 1.27 handle. The British pound continues to pick up a little bit of bullish pressure, and the market should go looking for the 1.28 level above there as it is a target that makes quite a bit of sense. I believe that pullbacks could offer value in this market, as the 1.26 level underneath should be a bit of a “floor.” Given enough time, if we can break above the 1.28 handle, the market should then go looking for the 1.30 level. This is a market that looks very volatile, and of course there are a lot of headlines out there that could move this market. Obviously, the negotiations about exiting the European Union will cause headlines, as politicians will almost undoubtedly say stupid things from time to time. That causes massive momentum swings in a market like this.
I believe that the market will probably be best traded with small positions, because of the volatility. If we can continue to work in our favor, then we can add to that position and go much higher. Ultimately, this is a market that continues to be choppy, so that gives you a bit of safety because the market could go against you rather rapidly. However, I think that longer-term we are starting to see the market try to turn things around and rally longer term. However, these trend changes are always a messy affair, and never easy to deal with, which of course is exactly what we are seeing here. If we did breakdown below the 1.26 handle, at that point I would have to think that we are going to fall much farther below and drop rapidly.
Written by FX Empire