The British pound rallied a bit during the trading session on Monday, breaking above the 1.3950 level. However, we have a significant amount of resistance just above, at least as far as psychological importance is concerned.
The British pound rallies a bit during the trading session on Monday, to reach towards the psychologically important 1.40 level. That’s an area that I think could cause a little bit of resistance but I certainly don’t see the reason as to why we won’t continue to go higher. Short-term pullback should be buying opportunities, and I believe that the 1.38 level underneath should be supportive. I think that’s an area based upon the structural action that we have seen lately that should be reasonably important. If we break down below there, then I think we go looking towards the 1.36 handle.
Longer-term, I do believe that the British pound should continue to go much higher, perhaps reaching towards the 1.45 level after that as it is a large, round, psychologically important number as well, and an area that in the past had mattered. I do think that longer-term we are going to find reasons to go higher, and I think that the US dollar is one of the main drivers as we continue to see a lot of selling when it comes to that currency.
Expect volatility, but that volatility should be a nice buying opportunity, and I think that the longer-term target should be closer to the 1.50 level, perhaps by the end of the year. The alternate scenario could be a breakdown below the 1.34 handle, but I would be rather surprised to see that, and at that point I would anticipate that the market would try to reset closer to the 1.30 level.
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.