- The British pound has rallied slightly during the early hours on Wednesday as we continue to threaten the 1.28 level against the US dollar.
- If we can break above there, the market is likely to go looking to the 1.29 level, which was an area we had pulled back from quite drastically.
- With this, I believe that you have a situation where the market is going to continue to be very noisy, and it is going to have a lot of resistance and above that it’s going to be difficult to break through.
All that being said, this is a pair that seems to be paying close attention to interest rates in the United States at the moment, and as bonds start to see lower rates, that could help the British pound gain against the greenback. That being said, you should also keep in mind that this is an area that has seen a lot of resistance previously, so it does make a certain amount of sense that we struggle. This is a market that I don’t have any interest in shorting, but the reality is that it’s difficult to simply jump in with both at the moment.
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Watch the USD Against Others
You should watch the US dollar against other currencies to see how this trade may play out. After all, this is significant resistance but if we start to see the US dollar get hammered against other currencies, it’s probably only a matter of time before it starts to lose value here. That being said, the exact opposite is also true so if we start to see the greenback strengthen against most things, that almost certainly will send this market to pull back and look for the 1.27 region underneath. The 50-Day EMA is underneath there and rising, so that also could offer a significant amount of support as well.
Ultimately, I believe this is a market that’s either going to break out, or that it’s going to go sideways in a tight range. A perfect example of this would be the AUD/USD pair at the moment, as we are heading into the summer which is quite often a very quiet time of year.
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