The British pound initially fell on Friday but has since seen a bit of a bounce as well.
GBP/USD
The British pound initially fell a bit during the trading session on Friday to break down below the 200-day EMA, but has since turned around to show signs of life. All things being equal, this is a market that continues to see a lot of choppy behavior, and at this point in time, we are basically sitting in the middle of the 200-point range that we have been in for some time.
The 1.35 level above is a significant resistance, just as the 1.33 level underneath has been a significant support. Interest rates in America are still somewhat elevated, but they are elevated in the United Kingdom as well, and quite frankly, higher. It's not a huge major difference, but it is enough that some traders will be paying attention to it.
Interest Rate Differentials and Range-Bound Volatility
At the very least, this is a scenario where traders are going to be watching this through the prism of a currency that should do fairly well against the dollar, all things being equal. While it can fall, obviously, it will more likely than not fall a lot less than others, like the Australian dollar, the New Zealand dollar, etc.
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If the US dollar starts to sell off, this is one of the first places you'll see strength. If we can break out of this 200-point range, then I think we could go to the 1.36 level to the upside or the 1.32 level to the downside.
In the meantime, I continue to play this 200-point range and try to take advantage of signs of exhaustion on the outer edges. Right now, we are dead smack in the middle, so unless you're short-term intraday range-bound trading, it's going to be difficult to put a lot of money to work.
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