- The British pound initially did try to rally a bit during the trading session on Tuesday but found the 1.36 level to be a bit too expensive and we have turned around.
- This is an area that has been major resistance previously and that doesn't surprise me that it has shown itself to be important again, because we had shot straight up in the air during the last couple of days, basically based on that jobs report in the United States that was so bad.
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That being said, it is really bizarre to think that we are suddenly going to launch higher because as the US goes generally the rest of the world goes. If the US is in fact going to enter recession, what you will see is people jumping into the US Treasury market. And in fact, we did see a little bit of that over the last couple of days, and that demands US dollars.
So, anybody that has British pounds or British assets, either sell those assets and convert the asset gains or losses into US dollars to throw into the treasury market, or they just flat out sell their British pounds, period. So with that, I think you have to look at this through the prism of a market that has reached the top of a consolidation area at the very least, and possibly look at it as a market that's giving you a little bit of a heads up that the US dollar might have some life in it.
That's especially true if we start to see people jumping into those Treasury markets Remember sometimes people buy the US dollar because yields are going higher other times They buy the US dollar because they just want to protect their capital. So, we'll have to see how this plays out. If we do break above the 1.36 level, then it opens up a move to the 1.38 level. But as things stand right now, I think we're still in the same 200 pip range.
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