The British pound has fallen a bit during the trading session on Friday to reach down towards the 50 day EMA and the 1.3750 level. That is an area that previously has been resistance in the past, and now is offering support as one would expect. All things being equal, the market would then go looking towards the 1.40 level again, which of course will attract a lot of attention. All things being equal, this is a market that has been in an uptrend for some time, and I do not think that is going to change anytime soon.
GBP/USD Video 8.03.21
If we did break down below the 1.3750 level, then I think that the market could go down towards the 1.35 level, an area that is even more important. That is an area that I think if we broke down below, then we could change the overall trend. I do not see that happening though, because quite frankly we are still looking at the “reflation trade” and of course massive amounts of stimulus coming out the United States. Furthermore, we also have the United Kingdom pushing ahead of its peers when it comes to vaccination. That does help the British pound significantly, and when you look at the historic charts of the British pound, we are still relatively cheap, so I think certain value hunters are out there trying to take advantage of it as well.
That being said, I do think that we have much further to go to the upside, but it is obvious that the 1.420 level is going to be difficult to get beyond. Once we do, it becomes more of a “buy-and-hold” type of situation.
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This article was originally posted on FX Empire