The British pound has rallied initially during the trading session on Tuesday, but then found resistance above. As I record this, it appears that the 50 EMA on the hourly chart is trying to offer support, so we may roll back to the upside. I believe that the 1.40 level above is going to continue to be important and will probably cause a significant resistance barrier. However, I do think that we break above there, and continue to go towards the 1.4250 level.
Ultimately, I think that the 1.38 level underneath is going to be a bit of a floor in the short term, but even if we break down below there I’m not ready to start selling, because I believe that the “flip” in the trend is going to be closer to the 1.3650 level underneath, as it was the scene of a major breakout. In that sense, this pair is very much like the EUR/USD pair, breaking out to the upside, and now has a significant level underneath that should continue to offer support.
Longer-term, I believe that we will eventually get into a “buy-and-hold” scenario, and I believe that the British pound is historically chief, perhaps far too cheap. I believe that eventually we will go back to the historical norms, which is probably closer to the 1.60 level. Obviously, it’s going to take a while to get there, but I do believe that is what we will see. I’m willing to add little bits and pieces along the way on pullbacks.
Written by FX Empire