The GBP/USD pair initially tried to rally during the Monday session, but ran into a bit of resistance near the 1.3575 level. Ultimately, I believe that the market is trying to build up enough momentum to finally break out to the upside, but I don’t know if we can clear the 1.3650 level easily. I think that we are currently going sideways to build up momentum, so it may take some time. If we do break down from here, I think there is more than enough support underneath to keep this market afloat, and quite frankly it could be a momentum building exercise. The volatility should continue, as we are weighing the possibility of the Bank of England raising interest rates soon, but at the same time the Federal Reserve shrinking its balance sheet. This pair should be very headline dependent in the near future.
The back and forth mentality the market is probably going to be a constant going forward, with so many possible scenarios playing out. However, I think that over the longer term, we should see a bigger decision made. If we can get the volatility and momentum to break out to the upside, the market could find itself going to the 1.40 level over the longer term. If we were to break down, I suspect that there is plenty of support underneath, especially near the 1.33 handle. That’s an area where I would anticipate that there should be some interest going forward. I don’t have any need to jump in right away, but I think in the short term, traders can go back and forth with small position size, as the volatility can lead to uncomfortable positions for those who are overleveraged in a market that could be very noisy
Written by FX Empire