The British pound has had a wild ride already during the day as I record this. We initially surged after the MPC announcement, reaching the 1.42 handle. However, we rolled over significantly from there and it now looks as if from a pullback to test the 1.41 region, and then perhaps even the 1.40 level. The market is still very bullish in general, but this has been a wild ride.
If we were to break down below the 1.40 level, then that would be rather negative, but we would still have the previous downtrend line to offer support as well. In other words, although I do see a scenario where short-term traders may be selling the British pound, I believe that the prudent trader will wait for some type of support underneath to take advantage of the overall uptrend. Although we have had a very violent pullbacks after the announcement, it hasn’t wiped out the uptrend, so I assume it continues from here.
I believe that the target is closer to the 1.43 level above, which was the most recent high, and then after that the 1.45 level. I believe that the noise in this market will continue to be an issue, so by all means keep your position size somewhat small, at least until the market moves in your favor. However, I’m looking for signs of a bounce or supportive to take advantage of what I think is going to end up being a value play. Obviously, if we break down below the support levels I mentioned, then I would have to reevaluate.
Written by FX Empire