The British pound had a volatile session during the day on Tuesday, as we reached towards the 1.3250 level, but then pulled back. It looks as if the 1.32 level is offering a significant amount of support though, so we could continue to grind higher. A breakdown below that level would have the market looking for support at the 1.3150 level, and then perhaps the 1.31 level after that. The British pound is going to be susceptible to a lot of noise coming out of the negotiations between the European Union and the United Kingdom, so be aware that this pair could suddenly move in one direction or the other.
Still bullish
Longer-term, I believe that the market should continue to be bullish, but we are a bit overextended currently, so I look at these pullbacks as an opportunity to take advantage of value. Longer-term, I believe that this market is probably going to go looking towards the 1.3450 level above, which is the top of the consolidation area that we have just reentered from several months ago. Alternately, if we can break above the 1.3450 level, the market will test the 1.35 handle. A break above there would be massively bullish, and I do believe that eventually the British pound will start to rally again, but there will be a lot of volatility between now and the end of that run.
Written by FX Empire