The British pound has fallen during a bulk of the session, although the Americans have started to give it a bit of a reprieve.
The British pound has fallen during a bulk of the session, although in New York, we are seeing a little bit of support right around the 50-day EMA. But really, at this point in time, I think what we are seeing is the market trying to roll over. After all, the US dollar continues to be extraordinarily resilient against multiple currencies, not just the British pound. You can also say the same thing about the Euro, the Swiss Franc, or the Canadian dollar, even the Japanese yen.
So, with that being said, I think the dollar is going to continue to strengthen. It certainly is showing no signs of weakening, and the Federal Reserve looks like it is going to be somewhat stagnant as far as monetary policy is concerned for the short term. The Bank of England is pretty much in the same situation, although it may end up cutting more quickly than the Fed, and that might be what drives this pair in the short term.
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Significant Resistance
The 1.35 level has obviously been a significant resistance and a significant magnet for the price. So, I think you should watch this as a situation where you are looking for signs of exhaustion after short-term rallies. If we break down below the low of Thursday, then the next target should end up being the 200-day EMA. Anything below there opens up a move down to the 1.32 level.
It is not until we break above the 1.36 level that I start to think that maybe the British pound takes off to the upside. And at this point, the interest rate differential really does not help you make a decision. So, I am just looking at this from a sentiment standpoint. Perhaps there is a run to the dollar; perhaps people look at London as likely to cut quicker than DC.
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