- The British Pound initially tried to rally a bit against the US dollar during the trading session on Friday, but then plunged as Israel attacked Iran, and a lot of people ran to the greenback for safety.
- Furthermore, we broke down below the crucial 1.24 level and now we are challenging the 1.2375 level.
- This is the bottom of the support region that if we were to break down below here, the bottom could fall out.
- In that environment, I think that the British pound is more likely than not going to go down to the 1.22 level.
The Target Above
On the other hand, if we rally from here, the 1.2450 level is an area that I think would offer quite a bit of resistance. And above there, the 1.25 level could be a significant barrier also. In general, anytime we rally, I'm looking for a selling opportunity, but I need to see signs of exhaustion to take advantage of as I want to get the best price possible to pick up cheap US dollars with the Federal Reserve likely to keep interest rates higher for longer.
That makes sense that the greenback continues to go higher. If the geopolitical issues continue to be rather sticky, that of course is going to cause major issues in any currency that quite frankly isn't the dollar. So, I think we made a pretty big statement during the Friday session and the fact that we're coming so close to the edge here, it's probably only a matter of time before we break through and go lower.
At this point, I think the British Pound will suffer at the hands of the United States dollar, which of course is a “safety currency.” In this environment, I think it makes a lot of sense to see this going forward. This is a sign that the USD will more likely continue to see strength against almost all currencies in the FX world. Expect volatility, but at this point, I cannot imagine shorting this market, or shorting the greenback overall.
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