The British pound continues to see a bit of bullish pressure overall, with the U.S. dollar being one of the few places where the Greenback is facing problems. At this point, I am only buying this pair.
GBP/USD
The British pound has rallied rather significantly during the trading session here on Monday, breaking above the 200-day EMA.
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The market is likely to continue to see a lot of noisy behavior, but short-term pullbacks, I do think, open up the possibility of buying a little bit of value in the pound because although the U.S. dollar is most certainly strong around the world, the Bank of England does have to worry about inflation as well, much in the same vein as the United States.
Interest rate differentials
So, the slight interest rate differential favoring the United Kingdom continues to be a driver. In short, this is a situation where, if I wish to buy the U.S. dollar, I'm not going to, at least not against the British pound. I will buy it against other currencies such as the Canadian dollar, Swiss franc, and Japanese yen. The British pound is going to put up a bit of a fight, and that's not necessarily something I want to deal with.
At this point in time, I think the 1.35 level is a possible target. After that, you could be looking at the 1.3650 level. Ultimately, though, short-term pullbacks, I think, could offer buying opportunities, with the 1.32 level being a bit of a floor.
Ultimately, I like this as a market that you look for value on dips. We sold off pretty drastically on Friday after the nonfarm payroll announcement in the United States, but all things being equal, I don't know that that changes things as much here as it might in some other currency pairs.
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