The British pound rallied a bit on Tuesday, bouncing from just above the 50 day EMA, and perhaps also recognizing the 1.3750 level underneath as important.
The British pound has rallied significantly during the course of the trading session on Tuesday, as the 50 day EMA is sitting underneath and the 1.3750 level. That is an area that has been important in the past, showing signs of resistance and was of course the scene of a major breakout. By doing so, the market has retested this area and it does look like it is going to hold in general. That being said, I do not necessarily think that this is going to be the easiest move higher. After all, you have to pay close attention to the 10 year yield, as that has been a main driver of the markets in general.
That being said, we are still very much in an uptrend and therefore I like the idea of buying this pair as long as the yields in America can calm down. With that being the case, buying short-term dips probably continues to be the way forward. Ultimately, this is a market that I think tries to go looking towards 1.42 handle. The 1.42 handle above has been resistance on a weekly chart basis, and therefore a lot of people will be paying close attention to that area. I think we will try to get back there to test that area, because quite frankly it should not be a huge surprise that we were not able to break above there right away.
To the downside, the 1.35 handle is a massive support level, so if we were to break down below there then I believe that the market would have changed the overall trend. Nonetheless, I do think that the market will continue to be choppy and well supported but if we do break that level then I think it could cause absolute chaos.
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Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.