The US dollar fell against most currencies on Tuesday, and the British pound was no different.
GBP/USD
The US dollar has been weak across the board with the British pound taking advantage of it on Tuesday as well. The 1.3550 level has been breached, and we have even tried to reach the 1.36 level. That being said, it is a little overextended here and I would be looking for a pullback to get long if I was looking to do so.
Interest rates in America have dropped fairly significantly during the day and that is a big reason why the US dollar has fallen against so many different currencies. At this point, I think we could see a potential break to the 1.37 level, an area that had previously been resistant.
Geopolitical Headlines and Yield Dynamics
If we break down from here, the 1.34 level would be targeted at the 50-day EMA again and unfortunately a lot of what we are probably going to see will more likely than not be driven by headlines coming out of the Middle East and the games being played through the media by both the Americans and the Iranians. After all, if we continue to see moves toward peace, that generally works against the value of the US dollar as people will put on more risk and it will help drive down the price of energy in the United Kingdom.
On the other hand, if we get some type of bad headline—and let’s face it, it could very well happen—that will send money right back into the US as the 10-year yield in the United States will climb again, perhaps breaking above the 4.30 level.
That being said, the Tuesday session seems to be fairly decisive so unless we get some type of random headline that throws everything into disarray, I think we're starting to see the US dollar roll over against many currencies. Not all, but many of the higher yielding ones.