The British pound rallied significantly during the trading session on Tuesday, as the British pound has seen a significant amount of buying pressure. We have broken above the 1.35 handle recently, and we have pulled back a little bit from the highs, but I believe that the 1.3650 level above is probably a massive barrier.
The British pound continues to be very volatile, but obviously buyers have come back significantly. I think that the market should go looking towards the 1.3650 level above, which is a major area to pay attention to on the chart. That was an area where we gapped lower significantly after the surprise vote to leave the European Union. Ultimately, I believe that the market breaking above that level is a longer-term “buy-and-hold” scenario, and then we would probably at every time the market dips. I believe that ultimately this is a market that should continue to be difficult, but given enough time I think that we will probably start the 1.40 level. Between now and then, the 1.35 level should offer a bit of a short-term floor, but a breakdown below there would necessarily be impossible either.
I believe that the US dollar is going to continue to soften in general, and I believe that the British pound will continue to benefit from that reason alone. But longer-term, it looks as if the British pound has been offering value the people are willing to take advantage of, and I think that the longer-term attitude of this market is trying to change. Eventually, I suspect that this will become one of the value plays of 2018. Expect a lot of noise between now and the nonfarm payroll numbers though, so be careful and to keep your position size small.
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.