- The British pound has initially tried to rally a bit during the trading session on Monday, but as you can see, has struggled a bit to continue to go higher and has turned things around actually to show signs of weakness.
- With that being the case, I think you've got a situation where traders will look at this through the prism of a market that is testing the 1.25 level for some type of support.
- If it continues to find support at the 1.25 level, then we may enter a range between 1.25 and 1.2750, which is a range that we've been in for a while now.
All things being equal, I do think it could very well be that case. We also have to keep in mind that this is a market that is dealing with a serious lack of liquidity at this point. Therefore, we have to pay attention to the idea of the holidays being a time where you probably should be leaving this alone. But even if we do have to trade this or we find that we are trading this, if we were to break down below the 1.25 level, I think the downside is somewhat limited, at least in the short term.
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Short term speaking, I think you've got a situation where GBP/USD traders will be looking at this through the prism of trying to find value. But if we break down below the 1.25 level, 1.23 is an area where we've seen buyers come in previously, and it wouldn't surprise me to see the British pound defended there. On the upside, the 1.275 zero level has been extraordinarily difficult to get above, and now we have the 50 day EMA there as well. I suspect the next couple of days will be more sideways with a downward slant than anything else.
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