The British pound rallied significantly during the Monday session, breaking above the 1.3333 handle, and then extending to the 1.34 level later in the day. It looks likely that the market is going to continue to see a lot of noise, as the British pound has a lot of headlines risk attached to it during the negotiations with Brussels. I believe that ultimately this market goes higher though, because quite frankly we have seen a very resilient British pound every time to get sold off. The 1.3333 handle is an area of significant support, and bouncing from there makes sense as we have seen it act so resiliently in the past.
I believe that the 1.35 level above will be targeted, and I also look at pullbacks as value in a market that for me is trying to break out for the longer-term. It will be interesting to see what happens next, but I think at this point any time we pull back, buyers will be below to take advantage of value. I think longer-term the British pound will probably break above the 1.3650 level, which is a major gap and therefore a major barrier in the market. Once we get above there, I plan to buy and holding the British pound for quite some time. The market will obviously be noisy occasionally, but at the end of the day I believe that the British pound has been oversold for quite some time, and that the early “smart money” is starting to get into it now. Once we get past the negotiations with Brussels, this pair should be free to go higher.
Written by FX Empire