The British pound has been very noisy in the Friday session, but at this point, it is difficult to get involved until a few levels get broken.
GBP/USD
The British pound has been all over the place during the Friday session as we continue to see the 1.35 level offer a bit of a resistance barrier. Ultimately, this is a market that I think you need to be very interested in because it gives you a bit of a heads up as to how the US dollar itself might behave.
After all, the British pound has until recently been one of the better performers against the US dollar, so the thought process is of course if the US dollar really starts to strengthen, the British pound might have to catch up to other currencies to sell off because the Bank of England is likely to start cutting rates this year, although we do know that the market is anticipating that the Federal Reserve will.
That being said, I think it's very difficult to imagine a situation where the Federal Reserve cuts as rapidly as the market wants and of course it's worth noting that the economic numbers in the United States continue to outperform. In fact, on Friday, the PPI numbers came out at roughly double what was anticipated.
Technical Analysis and Targets
From a technical analysis standpoint, it's worth watching the 1.36 level because if we can break above there then it opens up the possibility of a move to the 1.3750 level.
If we break down below the 1.3425 level then it opens up the possibility of a move down to the 200-day EMA, currently at the 1.3369 level, followed by the 1.33 level and then eventually the 1.32 level.
That would more likely than not coincide with not only British pound weakness but the US dollar strengthening quite drastically against other currencies. In fact, if this market does in fact break down from here, I will have no hesitation to start shorting immediately; I think it opens up the floodgates.
Potential signal: I am a seller in this market below the 1.3425 level, with a stop loss at the 1.3510 level, and a target of 1.3320.