The GBP/USD pair initially rallied on Tuesday but found enough resistance near the 1.3925 level to roll over a bit, testing the 50 EMA again. Ultimately, I think that the 1.40 level above is going to continue to be important, but I also believe that it will be broken.
The British pound has rallied initially during the trading session on Tuesday, but then found resistance above. As I record this, it appears that the 50 EMA on the hourly chart is trying to offer support, so we may roll back to the upside. I believe that the 1.40 level above is going to continue to be important and will probably cause a significant resistance barrier. However, I do think that we break above there, and continue to go towards the 1.4250 level.
Ultimately, I think that the 1.38 level underneath is going to be a bit of a floor in the short term, but even if we break down below there I’m not ready to start selling, because I believe that the “flip” in the trend is going to be closer to the 1.3650 level underneath, as it was the scene of a major breakout. In that sense, this pair is very much like the EUR/USD pair, breaking out to the upside, and now has a significant level underneath that should continue to offer support.
Longer-term, I believe that we will eventually get into a “buy-and-hold” scenario, and I believe that the British pound is historically chief, perhaps far too cheap. I believe that eventually we will go back to the historical norms, which is probably closer to the 1.60 level. Obviously, it’s going to take a while to get there, but I do believe that is what we will see. I’m willing to add little bits and pieces along the way on pullbacks.
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.