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Christopher Lewis
closeup Banknotes of the pound sterling

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The British pound has initially rally during the trading session on Tuesday but then pulled back to form a bit of a shooting star. Ultimately, I think that we are going to go finding support underneath near the 1.3750 level, assuming that we could even drop that far. The British pound is just a little bit overextended, so I do not necessarily think this is a big deal. I think it is probably going to be an opportunity to pick up a little bit of value underneath. That is not to say that it could not be violent, just that I think that what we have here is an opportunity to take a little bit of a breather after shooting straight up in the air.

The 1.3750 level was very difficult to break above, and now that we are starting to pull back, I think there will be plenty of people underneath trying to either cover shorts that have been blown out or join the trade as they may have missed the breakout. In general, I do not have any interest in shorting the British pound, because quite frankly it is an economy that a lot of people are putting quite a bit of faith in due to the coronavirus vaccination numbers and the fact that things seem to be turning around in the UK anyway. This is just the latest hint of good news coming out of Britain, as Brexit is now in the rearview mirror as well. Further compounding the upward momentum is the US stimulus plans.

For a look at all of today’s economic events, check out our economic calendar.
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