The British pound fell during Friday trading, reaching towards the 1.3350 level before bouncing. However, it looks as if it is going to sell off further into the US session, perhaps reaching towards the 1.33 level. I think that this market still has plenty of support underneath, but recently we have tested the gap lower from the Brexit vote to leave the European Union, and that is an area where I expect to see massive amounts of resistance. We may have to pullback to build up enough momentum to go higher. It’s a bit of a wait-and-see game, but I do think that it’s only a matter of time before the buyers return. Short-term traders may be profitable shorting this market, but I still believe in the longer-term upward momentum that we have build up. In fact, it’s possible that we are just a bit exhausted, and a drop of a handle or two won’t be that big of a thing looking at the longer-term charge.
In the short term, I would suspect that the 1.33 level will be attractive for a lot of traders, but it is difficult to imagine that we are going to break down completely, because quite frankly the Federal Reserve is already starting to send mixed signals about what its intentions are going forward. The Bank of England looks almost certain to raise interest rates in the next few months, and that of course should have traders looking to the British pound for value on these dips. I believe that eventually we break towards the 1.40 level, but to take some time to get there. It’s also get to take several attempts if history is any indication, so these pullback should be thought of as buying opportunities over the longer-term.
Written by FX Empire