The British pound went sideways initially during the session on Friday, but pulled back towards the 1.35 handle. That’s an area that offered a certain amount of support, as it has during most of the week. I believe that we may get a little bit of a pullback from here, but given enough time I think that the buyers will return. I think that the 1.3650 level above is massively resistive, as it is the scene of a gap from the reaction to the vote for the United Kingdom to leave the European Union. That of course is a significant amount reason to think that the market will continue to show intense volume in this area, but I believe that after the reaction we have seen over the last several weeks, we will probably break out to the upside given enough time. This is due to the Bank of England suggesting that interest rates are going higher over the longer term. That of course is good for the British pound, while the US dollar continues to soften.
Pullbacks are buying opportunities. That’s the bluntest way I can think of putting this market and perspective, as the strength that we have seen lately has been extraordinary. I think that a break above the 1.3650 level census market looking for the 1.40 level next. Ultimately, I think that pullbacks offer value if you are willing to wait for signs of support or impulsivity. I have no interest in shorting this market, least not until we clear the 1.30 level underneath which is over 5 handles below. Because of this, I think that we are simply trying to build up enough momentum to finally smash through that considerable barrier above. This could take a while, but once that happens it should be explosive.
Written by FX Empire