The British pound had an interesting session on Wednesday as we initially went sideways at the 1.29 handle, and then shot higher. I believe that the market is trying to “front run” the election results during the day today. Because of this, I think that the market will be apt to have pullbacks from time to time, but it’s obvious that the buyers are very active in this market. I believe that the 1.29 level will offer some sort of support, at least until the election results come out. Unfortunately, there are a lot of unknowns between now and the election, not the least of which will be how things turn out. This will also have a significant amount of effect on the British pound, as the uncertainty of the next move when it comes to leaving the European Union is high.
I believe in buying pullbacks going forward, as it offers value in a currency that I thinks been oversold. If we get a Conservative Party sweep, this could be very bullish for the currency, and should send the market much higher. On the other hand, if the Labour Party somehow takes the advantage, this would be extraordinarily negative for the British pound and should send it much lower. I believe that given enough time we will go higher, the question is whether or not the election sends the GBP/USD pair lower, and offering some type of value that we can take advantage of. If we can break above the 1.3050 level, the market should continue to go much higher, perhaps to the 1.3450 level above, which is my longer-term target to begin with. Ultimately, expect volatility so therefore your position size should be small if you were involved.
Written by FX Empire