The British pound has fallen quite a bit during the early part of the session here on Tuesday, but as you can see, the market continues to see a lot of noise and quite frankly, a lot of questions asked about the British pound against the US dollar.
Probably not so much in the realm of what's wrong with the pound, it's that there's a lot of fear out there and that makes the dollar strong.
Keep in mind that we are in the midst of filling the gap from the Monday open. That makes sense because we keep getting a lot of back and forth when it comes to the United States and Iran. So, with this, I believe this is a market that may try to bounce from here. We'll just have to watch the interest rates in both countries and of course, we'll have to watch the headlines.
Support Levels and Risk Appetite
If the GBP/USD pair does break down from here a little bit, the 200-day EMA right at the 1.34 level makes sense as support. Below there, the 1.33 level makes sense as support as well. So, in other words, even if we do fall, I think there are buyers’ underneath that are willing to get involved and take advantage of cheap British pounds.
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To the upside, the 1.36 level I think is your short-term target. Whether or not we can break above there remains to be seen. A lot of this will come down to risk appetite. Remember the US dollar, of course, is considered to be a safety currency and that, of course, is what I think a lot of people are looking at it as just a simple, possible safety play.
The noise will continue to be deafening and therefore I would expect to continue to see a lot of choppiness.
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