The British pound had a soft session on Tuesday, breaking below the 1.3450 level. The market looks as if it is ready to continue drifting a little bit lower, but I’m not expecting any type of meltdown. This is a currency pair that has been very strong as of late, and it makes sense that we may have to pull back slightly to build up enough momentum to break above the 1.3650 level above, which looks very important on longer-term charts. After all, this is a market that gapped below that level after the vote to leave the European Union, so one would have to think that a break above that level would be very bullish, and suddenly change everything. Because of this, I am looking for pullbacks offer value and perhaps a momentum building exercise to finally clear that gap.
Looking for support
In the meantime, I’m looking for support, which I suspect we will see closer to the 1.34 handle, and perhaps even the 1.33 level. Some type of bounce, supportive daily candle, or an impulsive bullish candle has me buying, as I don’t have any interest in shorting anytime soon as we have seen such a move into the British pound. With the Bank of England likely to raise interest rates, I suspect that this pair has quite a bit to go to the upside, but right now it looks like we are trying to digest the recent news, which of course has been very bullish. Once we do break above the 1.3650 level, the market will more than likely go looking towards the 1.40 level over the longer term. If we were to break down below 1.33, I think at that point we go down to the 1.31 handle.
Written by FX Empire