The British pound initially rally during the trading session on Monday, breaking above the significantly resistive 1.3333 handle. As I record this though, we are turning around to form a bit of a shooting star on the daily chart, suggesting that perhaps a pullback is coming. That pullbacks would make a lot of sense, this has been an area that has been very resistant in the past, and I believe that the market should continue to go down to the 1.32 handle, and perhaps even lower than that. Alternately, I believe that at this point if we were to break above the highs of the day, then that would of course be a very bullish sign and could send this market looking towards the 1.35 handle. When you look at the hourly chart, you can make out a bit of an uptrend in channel, so this is certainly a possibility.
Beyond the 1.35 handle, there is the significant 1.3650 level, which a break above would be a longer-term “buy-and-hold” situation. Until then, I think this is probably more of a “buy on the dips” situation, and even though I believe that the market will probably pull back, longer-term this is still a bullish market from what I can see. However, if we do break down below the 1.32 handle, then I think we could open the door to the 1.31 handle after that, which has been structurally important in the past. The one thing I think you can probably count on in this market though is going to be volatility as there is always the concern of headlines affecting the British pound involving the breakaway from the European Union, and of course of the United States Congress failing to pass tax legislation has caused volatility in the dollar as well.
Written by FX Empire