- During the trading session on Tuesday, we have seen the British pound break above the 1.32 level, but it has also shown signs of exhaustion.
- This is a pair that may have gotten a bit over its skis, and in this environment, I do think that a pullback makes quite a bit of sense.
- In fact, this chart reminds me a lot of the AUD/USD currency pair right now, and we’ve already seen the euro give back a little bit against the US dollar.
It is possible that we are starting to see money flow back into the United States if the bond market can be believed as well. While rates are still a bit on the high side, we have seen various duration do well in the United States bond market over the last couple of days.
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Do not get me wrong, this is a bullish trend, but it’s also one that is overdone and overextended. Because of this, it would not surprise me at all to see this market pull back from here, at least to the 1.31 level, if not the 1.30 level. The death of the US dollar has been an announcement that is far beyond premature, and if you look at the US Dollar Index, we are essentially in the middle of the overall range that we have been in for years. While this doesn’t necessarily tell you what’s going to happen with the British pound specifically, it does tell you that the overreaction of most traders is about to get them hurt.
Even if we do break to the upside, one would have to think that a certain lack of momentum is still going to be an issue. The pair could very well go to the 1.35 level, but I think it’s going to take a longer time than what we have seen over the last couple of weeks in this pair as far as turning things back around.
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