The British pound has fallen a bit during the trading session on Monday, reaching to lower levels. However, the 1.3333 level underneath continues to be important, an area that has been previously resistive, but also supportive recently as well. Because of this, I think that buyers are going to come back into this market place, and start picking up value in the British pound, perhaps making a run back towards the top of the consolidation area, at the 1.35 handle above. This is a market that continues to be very choppy, but I think that the upward momentum continues to be the biggest driver in this market, and although there are a lot of concerns about how the United Kingdom will perform after leaving the European Union, at the end of the day I think that as we get more certainty with the future the United Kingdom, that should help the British pound against the US dollar which has been so oversold for so long.
A breakdown below the 1.3333 handle has this market looking towards the 1.32 level after that, which is the next support level. At this point though, it looks like a simple return to consolidation and a return to the mean is probably the best way to look at this market. I also recommend that perhaps using a smaller than usual trading position might be the best way to go, as this type of choppiness and headline driven volatility can suddenly spike in one direction or another. This continues to build up momentum to perhaps get a breakout above, and enter a “buy-and-hold” situation.
Written by FX Empire