The British pound has broken below the 1.34 handle, an area that was significant support previously. Because of this, the market is likely to continue going lower, and short-term rallies are going to be selling opportunities. This is a market that has been supported at the 1.34 handle multiple times, but now that we have broken through there, it certainly looks as if we have further to go. In fact, from a longer-term standpoint, I anticipate that we probably go looking towards 1.30 level underneath.
This is not to say that we are going to get there quickly, just that the US dollar is by far one of the strongest currencies in the world right now. In fact, the US Dollar Index has broken above the 94.50 level, an area that is crucial. This shows just how much money is flowing back into the greenback, and based upon my technical analysis, it has much further to go. This will of course continue to see money flowing into the greenback in general, and therefore you have to look at this through the prism of selling the market every time the market tries to rally but fails.
I do not have any interest in trying to buy the British pound until we clear the 1.36 handle, something that would take a pretty big move to the upside to make that happen. If it did, then it could change a lot of things but right now we have broken major structure at the 1.34 handle, so therefore I think we have the momentum building up. This has been where I have referred to the market having a bit of a “trapdoor”, and it looks as if it just opened.
The US dollar is rallying against almost everything right now, so it does make a certain amount of sense that we would see it happen here. I do believe that this market will continue to have major pushes higher, followed by surges to the downside. With that in mind, I think it is only a matter of time before we get yet another opportunity. I will be adding every time the market shows a proclivity to go to the downside. The US dollar is about to really take off, as I believe that the US Dollar Index could very easily go back to the 99 handle, which would be a huge move in multiple currency pairs.