- The British pound is testing a key resistance zone near 1.34, with price action signaling indecision.
- Upcoming central bank decisions could drive a breakout or breakdown, making this a critical week for direction.
The British Pound has rallied slightly during the early hours here on Tuesday, as we have broken above the 1.34 level, but it is struggling to hang out above here with any type of stability.
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This is an area that I've been watching quite closely for a while, and I do think it will remain important. This area has been supported and resisted multiple times in the past, and recently, we formed a large, what I thought was a topping pattern, and I think right around here, we determined whether or not that's actually true.
That's the tricky part about trading a market like this because it could go either way, but the good news is that once it finally picks a direction, you should do fairly well. I think that a breakdown from here opens up the possibility of a revisit of the 200-day EMA and then the 1.32 level. But if we break to the upside, you could be looking at a move to the 1.36 level, maybe even the 1.37 level.
Key Levels and Central Bank Risk
Ultimately, this is a market that I think will remain very noisy and probably very volatile, especially now that the Federal Reserve has cut rates again and people are already starting to talk about the next rate cut. But at the same time, you have the Bank of England cutting rates more likely than not later this week. So, as the market knows that, it will be all about the statement and press conference.
All things being equal, this is a market that looks like it's bouncing and hitting a ceiling. The question is, can we break down from here and start really unraveling? Or can we break well above the 1.35 level and show that we are going to continue to rally? I suspect this is the pair to watch this week because you'll have the Bank of England, and you'll have the reaction. And then of course, it is a major pair so you can get an idea of what's going to happen with the US dollar against multiple other currencies.
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