- The British Pound continues to find quite a bit of support near the 1.25 level, which could probably be thought of as a massive support level.
- If we do break down below the 1.25 level, then I think it opens up a move for the British Pound to drop down to the 1.23 handle.
- This is an area that has been very important in the past.
The 1.23 handle is an area that I think a lot of people will be watching very closely. Market participants continue to see that area as previous resistance, now likely to offer support, as it even did once during the latter part of April this year.
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If We Could Break Higher…
On a rally, it's really not until we break above the 1.27 level that I think things start to change. All things being equal, GBP/USD is a market that looks like it's consolidating and trying to figure out where the bottom is, in an environment that continues to see the US Dollar destroy almost everything it touches.
There are a lot of reasons for the US Dollar to go higher, not the least of which is its safety play with geopolitics taking front and center stage. Yes, we've had these rallies, and the Lebanese agreed to a ceasefire, but we still have the issue in Ukraine. Furthermore, we have higher interest rates in America, and it looks like the pro-business administration that's coming in will bring in more investment.
So, it's a matter of people wanting to be involved in the US economy more than anything else at the moment. The interest rate differential between the two economies or currencies really isn't much to speak of, so I think a lot of this just comes down to how dominant the US Dollar is against almost everything. Watch that 1.25 level. Watch the 1.27 level.
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