The British pound rose against the US dollar on Monday to kick off the week. At this point, we have seen the previous resistance push back, though, and it looks like we are trying to form a range.
GBP/USD
The British pound rallied significantly during the trading session on Monday, reaching toward the 1.33 level. That's an area that previously had been supported, so it should be thought of as resistance. All things being equal, the British pound will continue to do fairly well during the bulk of trading sessions against the US dollar, as the interest rate differential isn't that great.
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Furthermore, you also have the fact that the British pound gives one of the highest in the G10, so therefore it tends to be at the very least less bad against the dollar than many others. So, this is where you go to right away to start buying a currency against the US dollar, and that's exactly what we've seen as the 1.32 level offered support yet again.
Key Technical Levels and Potential Scenarios
That being said, the 1.33 level is a significant resistance barrier, but if we could get above there, then we could go looking to the 200-day EMA. If we were to break down below the 1.3175 level, then we could see this market drop down to the 1.31 level.
Ultimately, I would expect a little bit of noisy trading here, but if we see the US dollar really start to sell off against multiple other currencies, then I think you have a situation where a recovery makes quite a bit of sense here. Just as if the US dollar really starts to take off as far as strength is concerned, we probably see a breakdown here, but quite frankly, I think other currencies would be more vulnerable than Sterling.
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