The British pound fell rather hard during the day on Wednesday, reaching down towards the 1.31 handle. There is a certain amount of support there though, extending down to the 1.30 level after that. I believe that the market looks likely to find buyers in this general vicinity, and it offers value in the British pound. We are towards the bottom of the overall consolidation area that we have been stuck in for several sessions, and I think that the buyers continue to look at this area as the British pound being cheap. The 1.30 level underneath should continue to offer a bit of a “floor” in the market, however if we are to break down below there, it’s likely that we could get a precipitous fall from there.
There is a significant uptrend line just below, and fixed at roughly the 1.30 level. This is why I would be so concerned about the British pound if we were to fall below that level. Alternately, I think that it makes more sense that we rally from here, and perhaps go looking towards the 1.3333 level again. That is the top of the overall consolidation area that we have been churning in, and therefore I think it will be a bit of a “ceiling” in the short term. If we can break above there, then the next target will be the 1.35 level, and then eventually the 1.3650 level after that.
I think that we will continue to see massive amounts of volatility, as there are a lot of headline concerns when it comes to the United Kingdom, but there is also a certain amount of expectation when it comes to inflation as well. Looking at a range bound trading strategy using the 2 major areas that I pointed out could be very profitable over the next several weeks.
Written by FX Empire