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Christopher Lewis

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The British pound has rallied significantly during the course of the week, finally breaking above the 1.40 level a bit during the Friday session. This was probably mainly due to Gilts offering more yield as bond traders are starting to sell things off. This makes the British pound rather attractive, especially as there is more than a 1% differential between German Bunds and the Gilt markets. With that being the case, it makes money naturally flow towards the United Kingdom.

Another thing that you should pay attention to of course is the fact that the UK has inoculated more of a percentage of its population than most other countries. If that remains the focus, then it makes sense that people would believe that the British economy will pick up quicker than many of the other ones. Ultimately, I do think that this is a market that will try to go looking towards the next major resistance barrier on the weekly chart, in the form of the 1.42 handle. However, we are getting a bit overdone and a pullback is desperately needed.

The 1.3750 level will more than likely offer a lot of support as it was major resistance, but at this point we are essentially in “no man’s land” as we are halfway between a major support level and a major resistance level, which means that you are essentially gambling as to the next short term move. A pullback that show signs of support though would not only be attractive, but it would signify a continuation of the trend that we have seen since the beginning of last year, all the way from the 1.15 handle.

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