- We have seen a lot of back and forth action in the British pound against the US dollar during the trading session on Tuesday as we are hovering near a major swing high.
- At this point, I'd like to point out that the British pound has fared better against the US dollar.
- Even though it fell, it fell less than most other major currencies.
It's because of this that I don't like shorting this pair so much, but I do look at it as probably the first place you want to get involved in if we start to see a massive dollar sell off. As things stand right now, we don't. We had seen the dollar sell off pretty significantly, but in the last month or so, it's more or less held its own. It's a little bit weaker against most currencies, but not drastically so.
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I think you have to keep in mind that this is a pair that you need to watch very closely because if we were to break above the 1.3650 level, it probably leads to the 1.40 level pretty quickly, maybe even 1.4250, but it would be an extreme weakness in the US dollar. That being said, when you look at a chart going back about eight years, you realize we're getting close to an area that's been a major resistance zone of about 250 pips.
So, the question is, “How much further do we have here?” The Federal Reserve is likely to remain somewhat tight with its monetary policy at the moment. And if that's going to be the case, the question then becomes how long do the British remain tight?
The Pound is Different than Others
One of the biggest advantages for the British pound right now is that the United Kingdom does have a trade agreement with the United States. So, the whole trade tariff situation doesn't even affect what's going on here except for with the dollar. So, it skews the risk in favor of the British pound. The 1.34 level underneath should be significant support. If we break down below there, then I'll be looking at a move to the 50 day EMA. And again, if we can break above the 1.365 zero level, then I think the British pound goes looking to the 1.4 level initially, possibly higher.
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