The British pound rose slightly during the day on Wednesday, testing the 1.33 level for resistance. If we can break above there, the market should continue to go much higher, perhaps reaching towards the 1.35 level above. I also believe the dips will offer buying opportunities, especially near the 1.32 handle. If we were to break down below that level, then the market could drop down to the 1.30 level underneath, but I think at this point it’s likely to see quite a bit of volatility. Keep in mind that the British pound has been rallying as traders expect the Bank of England to raise interest rates rather soon. The pullback that we have seen has been a nice opportunity to pick up value, and now it looks as if we are trying to form some type of base. This base could send this market higher as soon as we can get some type of catalyst for buying to reenter the market.
However, if we were to break down below the 1.32 level, I think the 1.30 level below will be even more supportive. Given enough time, I think that the market will eventually look towards the 1.3650 level above which was where the market had gapped lower after the surprise vote to leave the European Union buying the United Kingdom. Someday, we will break above that, and that should send this market much higher as it is a major breach of resistance. In the meantime, I think that we will have a bit of back-and-forth trading with an upward bias longer term. These dips are simply going to be opportunities to pick up the British pound at cheap levels to take advantage of what I think is an impending breakout over the next several months.
Written by FX Empire