The British pound went back and forth during the course of the trading week as we are trying to discern whether or not the British pound has enough momentum to continue going higher. At this point, it looks as if the 1.3750 level will continue to be very difficult to overcome, and thereby I think a little bit of sideways action would make quite a bit of sense in this general vicinity. If we can break above the top of the candlestick, then it is likely that we go looking towards the 1.40 level above and then eventually the 1.43 level.
GBP/USD Video 25.01.20
To the downside, if we were to break down below the 1.35 handle, then I would be a little bit more bearish, perhaps thinking that the market could go down to the 1.33 handle. Ultimately though, I do not expect that to be the path of least resistance. All things being equal, the market should probably find plenty of buyers underneath, if for no other reason than the fact that the US dollar is going to continue to suffer at the hand of stimulus.
Furthermore, the British pound is simply exhausted, it is not necessarily a currency that should go straight up in the air if for no other reason than the fact that the British economy continues to be threatened by lockdowns and of course the aftereffect of the Brexit situation, but at the end of the day we are still historically cheap, so there should be value hunters out there willing to pick up the British pound every time it dips.
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This article was originally posted on FX Empire