- The British pound rallied significantly during the trading session on Tuesday as it looks like we are trying to get to the 1.37 level.
- It is worth noting that the FOMC interest rate decision is on Wednesday, and the Bank of England meeting and decision is on Thursday.
- In other words, this is a market that is going to be very noisy over the next 24 hours. That being said, I do think that you have a scenario where people could get caught on the wrong side of this trade very quickly.
Technical Analysis
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The technical analysis for this market is very bullish at the moment, but of course we have a couple of different announcements that could throw this market into chaos. With that being the case, the market is likely to continue to see quite a bit of volatility, although I’m the first to admit that it looks very bullish at the moment.
If that bullish pressure can continue, I don’t see anything that would keep the British pound from reaching the 1.38 level, possibly even the 1.39 level. Short-term pullbacks at this point in time will continue to look at the 1.36 level has an important level, because it had previously been resistant so if we do pull back at this point, it’s likely to offer support. Anything below that level probably puts a lot of questions about the trend into effect. This will be especially true if the Bank of England seems softer or more dovish than anticipated.
The Federal Reserve of course is expected to cut rates, dropping 0.25% on Wednesday. If they do not, or if they sound like they are hesitant to continue cutting, you could see a massive turnaround at this point. That being said, you need to be very cautious with your position size in this pair, but it certainly looks as if it wants to go higher, at least as things stand at the moment.
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