- British pound rallied during the session on Tuesday to pierce the $1.35$ level.
- At this point, we have to ask questions about whether or not this is a British pound thing or if it's a US dollar thing.
- Truthfully, it's the US dollar, I think that's the bigger mover here, mainly because I am seeing US dollar weakness across the board, and this pair will follow right along with others like the Euro or the Swiss franc, etc.
With that being the case, this is a market that I think will continue to be noisy, but the $1.35$ level is an area that's been important in the past, and of course, it's a large round, psychologically significant figure, so I do anticipate that there will be a certain amount of questions asked at this point.
Potential for a Move to 1.37
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If we can clear this area, it's possible that we will end up going to the $1.37$ level. If we turn around and fall from here, it's really not until we break down below the $1.34$ level that I think we will see a little bit more negative. Keep in mind that at this time of year, we have to worry about liquidity and volume, and that, of course, is a major influence as well.
With that being the case, I think you have to look at this through the prism of what's going on with the Federal Reserve and, of course, the fact that the British pound has been a fairly strong performer in relation to the dollar over the last couple of years. Even when the US dollar was so strong, the British pound held up better than most of its contemporaries. Because of this, I'm watching the US dollar across the board, and if it does start to shrink, then this is a place I want to get long of. On the other hand, if the US dollar strengthens, I could short the British pound, but I will probably get more traction out of certain currencies like the Australian dollar or the New Zealand dollar.
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