- The British pound has fluctuated back and forth during Monday's trading session against the US dollar, showing some hesitation.
- The market is currently hovering around the 1.29 level and the 61.8% Fibonacci retracement level, which suggests that additional sellers could emerge in this area.
- This is an area that I think could open up the possibility of a major move, and not necessarily to the upside, despite the odds suggesting it at the moment.
A Massive Barrier
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The zone between 1.29 and 1.30 could act as a major barrier. If the pair breaks above the 1.30 level, the British pound may have room to move higher. However, given the extended nature of the market, it is more likely that we either see sideways movement or a pullback. If the price drops below the recent lows of the last few days, a decline toward the 1.2750 level becomes a possibility.
That being said, it is also important to recognize that this could simply be a reversion to the mean. Observing the chart, the sharp and aggressive move higher is evident. Some traders may also view this as an inverted head and shoulders pattern that recently broke, with the measured move from the head to the neckline suggesting a potential rally toward the 1.3350 level, which aligns with the previous swing high.
That level was last seen around mid-2024, and whether or not the market reaches that point remains uncertain. In the short term, a pullback seems more likely than not. Whether this ultimately shifts the overall trend of the pair is another question entirely. Because of this, I am a bit hesitant to get long of this market in general, and this is a situation where traders will continue to see the US dollar be the main driver of where we are going to say the least.
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