- The British pound has rallied a bit against the U S dollar during the trading session here on Wednesday, as we have broken towards the 1.36 level, the 1.36 level is a large round psychologically significant figure and an area that has been important a couple of times.
- If we can break above the 1.36 level, then it’s likely that the British pound goes looking to the 1.38 handle.
- Short-term pullbacks here are possible with the 50 day EMA offering a bit of support near the 1.3433 level.
Anything below could open up a drop down to the 200 day EMA, but all things being equal, this is a situation where I think a lot of people are going to be looking at this as a harbinger of U S dollar weakness or strength. This is one of the favorite charts for me daily at the moment.
Pound Has Outperformed Previously
After all, even when the U S dollar was so strong during 2024, the British pound fared better than most of its competitors. Just as we’ve seen the same thing on the way back up. If this pair starts to fall apart, I still might not short it, but I probably will short other currencies like the Canadian dollar, the Euro, the Japanese yen, etc.
All things being equal though, this is a market that looks like it is trying to get to the upside and eventually break towards 1.38, a trade that I’m very comfortable with, but admittedly have to recognize that this V pattern is pretty aggressive. So, whether or not we can keep up the momentum is a completely different question, but either way, I’m at the very least not shorting this pair anytime soon. I look at it more of an indicator of the US dollar than anything else.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.