The British pound continues to see a bit of support in this area, as we wait for news out of the Middle East.
GBP/USD
The British pound continues to go back and forth during the trading session on Wednesday as we're hanging around the crucial 1.35 level. The 1.35 level has been important multiple times and at the moment at least is starting to show signs of support. This was previous resistance and I think ultimately we are in a bit of a holding pattern and this makes sense because I see this across the world.
With the overall nastiness coming out of the news headlines that are throwing the bond markets around it does make sense that we find ourselves just stuck. That being said I do think I favor the upside more than the down because the British pound had been rallying for a while and even when it wasn't it tends to do better against the US dollar than many other currencies and that makes sense because the interest rate differential is almost non-existent.
Central Bank Policy and Technical Levels
In this environment you have to keep an eye on the Bank of England because they may have to stay tight for longer than anticipated and that of course helps the argument for the pound to rally as well. So with that being said I like the idea of buying short-term pullbacks but I also recognize that if we were to break down below the 1.3450 level then maybe we have a little bit more downside ahead of us.
If we start to see the US dollar strengthen then I think you have to look at this through the attitude of maybe buying the dollar against weaker currencies. At this point I think we're range bound but once we get an impulsive candlestick in either direction that could give us a clear path to either 1.3750 eventually to the upside or down to the 200.