The British pound went sideways initially during the day on Friday, but then sliced through the 1.30 level, and then eventually the 1.3050 level, an area that I have been calling major resistance recently. I believe that since we’ve done this, the British pound will continue to go much higher against the US dollar as weak inflationary numbers had come out during the day on Friday. Ultimately, I believe that the market is going to go looking for the 1.3450 level above, which is my longer-term target. Short-term pullbacks continue to offer value, and people will be looking to get in on the move, who certainly would have been caught by surprise.
The 1.30 floor
I think that the 1.30 level will continue to be the floor in the market, so given enough time I believe that buyers will return every time we get close to that area, assuming we’ve and go that low. It might be choppy and volatile, but there are several things that could come out to help the British pound. For example, the Federal Reserve could look less likely to raise interest rates in a timely manner, or possibly even some type of consensus as to what’s going to happen with the divorce proceedings between the United Kingdom and the European Union. It really doesn’t matter what that answer is, just that there some type of certainty, which is what markets tend to look for more than anything else. Technically speaking we have broken out, and I think that will continue to be the case in this pair as we grind our way much higher.
Written by FX Empire