The British pound gapped lower on Monday, but then turned around to reach the highs of the Friday session before breaking down. At this point, it looks as if the British pound is going to close at the very bottom of the range for the session, which is a negative turn of events. If the market can break down below the 1.3200 level, then we could go looking towards the bottom again. At that point, I would anticipate that we could go looking towards 1.30 level as well.
That being said, the market is more than likely going to continue to see a bit of hesitation heading into the Federal Reserve meeting, which starts on Tuesday and ends on Wednesday. Because of this, I think the market could be a bit quiet, but I also believe that it would only be a matter of time before we sell off or shoot higher on Tuesday. As far as buying is concerned, if we can take out the 1.3250 level, we may have a short-term trade to the upside, with an eye on the 1.34 handle as significant resistance. That being said, if we were to rally from here for any significant amount of time, it would almost certainly have something to do with the Federal Reserve being more dovish than originally thought. That is very unlikely, at least with inflation starting to ratchet up.
When you look at this chart, it is very easy to see that we are simply killing a bunch of time sitting above a significant support level, and when you look at the longer-term charts, you can see just how important this area is. It is more likely than not going to be a major battleground, but we may not see a significant move until after New Year’s Day, as this time of year tends to be very thinly traded. That being said, if there is some type of significant shock to the system, then the move could be rather sudden due to the fact that there will not be as many people involved. That is not necessarily what I expect, but it is a possibility this time of year. Be cautious with your position size just in case something does happen.
