The British pound went sideways during the trading session on Tuesday, as the 1.3050 level underneath should offer support. I believe that the market will eventually rally, as we have been consolidating for some time. Because of this, I’m a buyer of the British pound, but for short-term trades only. We did gap down at the open on Monday, and we should go looking to fill that gap given enough time. I think that the market is going to continue to be very noisy, because there are a lot of issues involving the United Kingdom and of course the United States as well. The US Congress not been able to pass tax reform has worked against the value of the dollar, but at the same time Teresa May has several issues when it comes to confidence in her own party. With this, I think that this market will continue to chop around in this area, but as we are closer to the bottom of the area, it makes sense that the buyers will come in and try to push this market towards the fair value level.
If we were to break above the 1.3333 handle, the market should then go to the 1.35 level, and then to the 1.3650 level after that which was the scene of the gap down lower at the surprise vote to leave the European Union. If we can break above there, the market should continue to go much higher, and it would become more of a “buy-and-hold” scenario. Ultimately, this is a market that I think will find its footing, but we have a lot of work to do between now and then. If we were to break down below the 1.30 level, the market should drop down to the 1.2750 level almost immediately, and then perhaps the 1.25 handle.
Written by FX Empire