British pound continues to see a lot of noisy sideways trading.
British pound dropped initially during the trading session on Thursday but has turned around to show signs of life again as the market continues to bang around in a fairly well-defined range.
The 200-day EMA sits right about where we are, and it is worth noting that we have significant action in this area back and forth from short-term trading.
The 1.3250 level underneath continues to be a floor in the market with the 1.35 level above being a significant resistance barrier.
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Range Bound Dynamics and Interest Rate Stability
Ultimately, I think the GBP/USD pair really doesn't know what to do with itself and it makes sense considering that interest rates in both countries are remaining stubbornly strong. If that's going to be the case, the market probably finds a range to hang out in just like we've seen over the last couple of months. We are in the middle of this range, almost dead smack in the middle, so we are essentially where traders would probably consider this to be fair value.
If we rally from here, I will look for signs of exhaustion near the 1.35 level, just as I would look for signs of a bounce at the 1.3250 level. I think ultimately though, this is a pair that is probably falling in the purview of short-term back-and-forth traders, perhaps traders using the 4-hour chart or something similar to that.
I don't really see this as a scenario where we make a bigger decision anytime soon, although one would have to assume that if there was a currency that was suddenly going to get strong, it probably would be the US dollar based on the headlines coming out of the Middle East. Short-term traders will continue to flock to this pair, the interest rate differential really is nothing worth speaking of, so I think you just have a tug-of-war that you can play if you are patient.
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