The British pound has shown its strength early on Wednesday, as rates in the US dropped. That being said, we have failed to stay above a crucial level.
GBP/USD
The British pound rallied initially during the trading session on Wednesday, breaking above the 1.36 level. The 1.36 level is a large round psychologically significant figure that a lot of people will be watching. It has been very difficult to stay above and the fact that we pulled back a bit during the session on Wednesday suggests that we are going to continue to be worried about this area.
If we were to break above the 1.36 level, then we could go to the 1.3650 level which is where we pulled back from. Pay close attention to the interest rates in the United States as well as the United Kingdom and quite frankly, this is a market that I think stays range bound because part of what we had seen during the day was just a simple reaction to the idea that the Americans and the Iranians might still be talking and perhaps progressing.
Market Volatility and Technical Support
This is a story that we've seen play out more than once and quite frankly, I don't know what has ended up changing. In fact, this is a market that continues to see a lot of hesitation as we have seen previous indications that peace talks were progressing but have since failed.
Now that we have pulled back to break below the 1.360 level, I think it does suggest that perhaps the market is just waiting and trying to figure out whether or not we actually are going to get the real thing. To the downside, I see the 50-day EMA as a significant support level near the 1.3460 level.
It's been pretty supportive over the last several weeks and despite the fact that we saw that shot higher and clearly the market wants to short the dollar, the reality is it only takes one tweet or snippet in the press to get the market to fall right back apart as far as risk appetite is concerned.