The British pound has rallied significantly during the training session on Tuesday, reaching towards the highs from last week, but failed to break above there. At this point I think it is only a matter of time before the buyers jump in and try to take advantage of the market if it offers a little bit of value on dips, and I also recognize that the 1.30 level underneath should be a massive support. I believe at this point we are more likely to go back and forth in an attempt to work off some of the excesses after the impulsive move to the upside.
However, we may have to work off some of the excesses that we have seen as of late. That might be why we are trying to form some type of consolidation area, and I think that makes quite a bit of sense as we head into the later part of the week. There are multiple announcements that people will be paying attention to, not the least of which will be the employment figures coming on both Thursday and Friday out of the United States.
If we were to break down below the 1.30 level that would obviously be bearish, but it is not a selling opportunity, rather it is going to be a nice buying opportunity that offers value. The 1.2750 level should continue to be important, and I believe it is also the beginning of support down to the 1.2650 level. That being said, I think that the market is likely to continue to see a lot of buying pressure down in that area so if we do break down below the 1.30 level, I will be waiting in that area to buy the British pound as it will offer value yet again. After all, we have rallied rather significantly.
The Federal Reserve continues to flood the market with greenbacks, and that works against the value of the US dollar in general. This is one of the main reasons the British pound has rallied, due to the fact that the US dollar has fallen so hard. Now that we have pulled back from the highs, I think we may see a short-term buying opportunity on dips, and eventually, we will break out to the upside. If we can get above that, then it is likely that we go looking towards the 1.35 handle.