- The British pound has rallied significantly during the trading session on Tuesday, slamming into the 1.28 level by the time the Americans came on board.
- This is an area that could be significant resistance, so you need to pay close attention to it.
- Quite frankly, the market does look a little stretched, so if we get any type of “risk off move”, that could send this market reeling.
However, it’s also worth noting that the US dollar seems to be on the back foot against several currencies, and the fact that the British pound is gaining against the greenback should not be a surprise as a result. We had recently broken above the 61.8% Fibonacci were to level of the overall selloff that we had seen earlier this year, which is typically a sign that we will eventually try to get to the beginning of the move. If that’s the case, then the British pound will reach the 1.29 level, but we need to clear the 1.28 level on a daily close before that happens.
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All things being equal, I think this remains a market that you need to pay close attention to, and you probably also need to look at it through the process of trying to pick up “cheap British pounds”, at least until we break down below the 1.2675 level at the very least. With this, I do suspect that this pair will follow the overall attitude of the US dollar, and it is probably worth noting that the British pound has done fairly well against most other currencies, so this is certainly one that will do well against the greenback if it starts to fall overall.
Find value
I think at this point in time, the most important thing you can do is to find value. The question of course is going to be whether or not that value is in the US dollar or if it’s in the British pound. I certainly suggest that the 1.28 level could be an area that a lot of people pay close attention to and quite frankly could be a pivotal point for the overall trend. Because of this, I will be paying close attention to the British pound over the next couple of days.
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