The British pound rallied a bit during the trading session on Wednesday, bouncing from the uptrend line that we have seen causing quite a bit of support more than once. The 1.35 level is just below the uptrend line, which of course has kept this market bullish for months.
The British pound rallied quite nicely during the session on Wednesday, reaching towards the 1.36 level. I see more resistance at the 1.2650 level as well, as it is an area that has been both support and resistance in the past. I look at this uptrend line and recognize that if we break down to a fresh, new low, it’s very likely that this market will unwind rapidly, perhaps down to the 1.33 level, and then eventually the 1.30 level underneath, which of course is a large, round, psychologically significant figure in a number that has attracted a lot of attention in the past.
The alternate scenario is that we clear the 1.3650 handle on a daily close. If we do, then I think the market probably goes towards the 1.38 handle above. After that, I look at the 1.40 level as the next stop. Ultimately, if we were to clear that level then I think the market continues the longer-term uptrend with confidence. Until then, I think there are a lot of concerns and a lot of noise that will affect these markets. I recognize that the Bank of England looking likely to keep interest rates lower for the longer-term will continue to weigh upon the market. But I do think that longer-term people are starting to look at the British pound as something that is a bit oversold. I expect a lot of noise over the next couple of sessions, but we have a couple of clearly defined levels that can fire off the next trade.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.