The British pound has had a rough March, as we have fallen hard, bounced, and then turned around to fall hard yet again. The 1.30 level is the most obvious area of interest in this market right now, and if we can break it down below there, it could open up another attempt at a significant breakdown.
When you look at the chart, this is a reflection of the interest rate differential as the United States continues to see rising rates. This makes the US dollar much more attractive than the British pound, although it is worth noting that the Bank of England is probably the only central bank out of the majors that is every bit as hawkish as the Federal Reserve is concerned, so it has insulated the British pound from some of the massive selloff that we have seen. However, it looks as if the cracks in the ice are finally starting to open up, so a move down below the 1.30 level is likely to trigger even more selling.
At that point, I would anticipate that the British pound goes looking towards the 1.28 handle, which is an area that had previously been supportive before. Breaking down below there would then open up the British pound to significant selling, perhaps opening up a bit of a freefall. On the other hand, if we were to turn around and break above the shooting star from the weekly chart, it could open up a move towards the 1.34 handle, perhaps even the 1.35 handle.
All of that is possible to the upside if we get some type of shift in the overall attitude of the US dollar. With rates spiking the way they have, along with a whole host of major concerns around the world, that does not seem likely, so I would suggest that the most positive outlook for this currency pair is to consolidate just above the 1.30 level. If that were to happen, then we can start to focus on the longer-term fundamentals and what would perhaps be the next big move. At this point though, it looks as if the month of April will either be negative or consolidation. The 1.30 area is going to be crucial for the next decision that we have to make.