The British pound rallied on Monday, as we have seen a lot of US dollar weakness in general. At this point, we are now facing a significant resistance barrier as well.
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GBP/USD
The British pound rallied quite significantly early during the day on Monday as we have broken above the 1.36 level again. That being said, the market is also facing quite a bit of resistance in the area, extending to the 1.37 level. So, I think it's probably an area that is difficult to start buying.
If we fall from here, we could see a drop back below the 1.36 level, perhaps even down to the 1.3550 level. This is a market that of course will be paying close attention to interest rates and interest rates in America are starting to climb so that could overwhelm the market again.
Volatility and Risk Appetite
That being said, I also recognize that we have been sideways for a while and that might end up being the way going forward. I do not have any interest in getting too big into a position right now but I also recognize that we have a lot of questions to ask out there about the overall direction of risk appetite and with the headlines coming out of the Middle East, it's very volatile to say the least just as all other asset markets are.
If we were to break down below the 1.35 level it would be extraordinarily negative, just as if we were to break above the 1.37 level it would be extraordinarily positive. Ultimately, I think the market just doesn't know what it is that it needs to be done and we will continue to see a lot of sideways action. I think this is how things will go for some time, as we are trying to sort out the chaos of the world.