The British pound went sideways overall during the day on Tuesday, showing signs of support near the 1.32 level. I believe that ultimately, we will probably bounce, but we will more than likely have a lot of choppiness in the meantime. I think that a move above the 1.33 level would be very bullish, and should send this market towards the 1.35 handle above. Longer-term, I believe that the 1.3650 level above is the top of the overall trading range right now, and if we can break above there it would be an extraordinarily bullish sign as it would be the market breaking above the gap lower from the vote to leave the European Union. That would be a significant change in fortunes for the British pound. I believe that the market will continue to see volatility, but longer-term I also believe in the uptrend as the Bank of England is very likely to raise interest rates.
Buying the breakout
I believe that buying a breakout is the best way to go, as the 1.33 level, although not extraordinarily important, does carry a certain amount of psychological importance. Given enough time, the market should then go looking towards the resistance above. If we do break down from here, I believe that the 1.32 level will offer support, and of course there is even more support near the 1.30 level underneath as it is a large, round, psychologically significant level. If we are breakdown below there, then the market falls apart and I think that any hope of an uptrend will be all but dead at that point. I still believe that the buyers will probably come out on top, so I am much more inclined to be bullish of the British pound than bearish.
Written by FX Empire