The British pound fell apart during the session on Tuesday, slicing through the 1.2950 level finally. It now looks as if the 1.2850 level will be support, and if we can break below there things could get rather ugly. Ultimately, I think that the markets breaking below there will go looking towards the 1.27 level next, and I think at this point in time you have to look at rallies as a selling opportunity at the first signs of exhaustion. Ultimately, I think that it’s not until we break above the 1.3050 level that buying is even possible as the market has broken through a rather significant support barrier. Because of this, I believe that short-term traders will continue to punish the British pound going forward.
I think it’s obvious that the US dollar is becoming favored again, and therefore it makes sense to be short of this pair overall. That doesn’t mean that we won’t get volatility occasionally, but that volatility should give you a decent chance to get involved in the market and start selling again. If we did somehow break above the 1.3050 level, I think at that point we would be looking to get to the 1.32 level above. All things being equal, it looks as if the sellers are in control so I don’t have much in the way of interest when it comes to trying to buy this market until we make the previously mentioned break out. If we can break below the 1.27 handle underneath, we could fall rather quickly to the 1.25 level as it would show a deepening of the bearish sentiment. I don’t necessarily believe that will happen, I just think that we are going to continue to drift lower in a back and forth type of manner.
Written by FX Empire