The British pound has initially tried to break above the 1.40 level but has pulled back from there is one would expect. After all, this is a market that has been very bullish as of late, so it’s likely that we would of course fail at this large number. If we can break above the 1.40 level, the market should continue to go much higher, reaching the 1.45 level next. The US dollar course has been very soft, so I think that we will continue to go much higher. Beyond the fact that the British pound is historically cheap, the US dollar is struggling against most other currencies, so that gives us a bit of a “double whammy” when it comes to the upside.
I believe that there is plenty of support underneath, especially near the 1.3850 level. That’s an area that has a lot of noise around it, so I think that the markets will find plenty of value hunters in that area, as the uptrend has become obvious, even to the thickest of traders. If we break down below that level, then we probably go down to the 1.3650 level, the scene of a major breakout previously. I think that it’s only a matter of time before the buyers return though, so even on that move I would be somewhat cautious as far as short positions are concerned.
Written by FX Empire