The British pound fell significantly at the open on Friday, reaching down to the 1.3075 level. We have bounced from there, and we are getting close to an uptrend line just below on the weekly chart. Because of this, I would not be surprised at all to see this market rally, and a break above the 1.3150 level would confirm that a bit of strength needs to come back into the market. However, if we were to break down below the 1.30 level, the market should then sell off rather rapidly. I think there are a lot of headlines out there that could move the British pound going forward, and of course we have the Federal Reserve looking very likely to raise interest rates and the short-term, but we also have the Bank of England looking to the same thing. Because of this, expect see a lot of volatility in this market, but I think at this point, at least for short-term traders, we are oversold.
I recognize that the 1.3250 level above will be resistive, so break above there would of course be an extraordinarily bullish sign. Currently, I believe that we continue to have a lot of choppiness back and forth, and therefore range bound trading systems are to be employed. Although it has been rather negative over the last couple of days, and by extension the weekly candle looks a bit soft, I also recognize that there’s an immense amount of support underneath. The next couple of days will probably be very difficult, but eventually we will decide and go much higher and one direction or the other. Ultimately, markets continue to be volatile, but small trading positions can help mitigate some of the risk that you will undoubtedly face.
Written by FX Empire