The British pound has been somewhat strong in the early part of the session on Tuesday, as traders are looking to take advantage of the overall range.
The British pound rallied significantly as interest rates in the United States started to slip.
Ultimately, we are watching the 200-day EMA because it did push back just a bit at the 1.34 level.
The 1.34 level has been an area of importance in both support and resistance in short-term charts but longer-term terms, when you look at the GBP/USD chart, the real range is between the 1.33 level on the bottom and the 1.35 level on the top. Ultimately, this is a market that I think continues to see a lot of volatility and you will have to watch the interest rates in the United States. The interest rates in the United States did fall a bit during the session so that helps the British pound, at least in terms of US dollars.
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Relative Strength and Policy Differentials
Ultimately, I do think this is a market that is worth watching in the sense that the British pound has fared better against the US dollar than many other currencies and that probably remains the case. After all, the Bank of England is tighter than most central banks and the interest rate differential actually favor the British, although very slightly.
In other words, if the US dollar starts to fall against most currencies, this might be a great place to buy as it would be working against the value of the dollar when you go long of this pair.
That being said, if the US dollar really starts to strengthen, while you could short this pair, the reality is you probably get more mileage out of other currency pairs. As things stand right now, it looks like the middle of the range is offering a little bit of resistance so a short-term pullback might make sense, but all things being equal, as things stand right now, I am only a buyer of this pair.
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