The British pound went sideways initially during the day on Tuesday, but then shot much higher, reaching towards the 1.3250 level. If we can make a fresh, new high, there’s no reason to think that we won’t go towards the 1.35 level above which should be the next major resistance barrier. A break above there could send this market much higher, perhaps to the 1.3650 level, which is the scene of the recent breakdown and gap lower from the surprise boat to leave the European Union. Because of this, if we can break above that level we should continue to go much higher, perhaps reaching towards the 1.40 level above. Because of the magnitude of the resistance that we are facing, I believe waiting until we get a daily close to tell us which direction to trade is probably the smart way to go about this market.
Patience will be needed, but eventually the market should show itself and its intentions. The market should continue to be very choppy, there are a lot of moving pieces. The Federal Reserve raising interest rates of course helps the US dollar, but at the same time and inflation area pressures are picking up in the United Kingdom. Because of this, I believe that we will see a lot of choppiness and volatility. Longer-term, I do believe in the British pound and where it goes from here, but in the short term there is a lot of work to do to get back to the longer-term uptrend that I think is trying to form. I believe that the 1.32 level should now offer a bit of support, so playing a bounce from that level could be a good way to go as well. A breakdown below there then has the market looking towards the 1.31 handle underneath.
Written by FX Empire