The British pound initially tried to rally during the trading session on Tuesday to reach down towards the 1.41 handle, before we had seen a significant amount of selling. Ultimately, this is a market that is a little overextended, but at this point I believe that what we are looking at is a market that simply is going to drift lower in order to pick up more momentum. To the downside, I believe that the 1.3750 level will be a massive support level due to the previous resistance level that we had broken through.
GBP/USD Video 24.02.21
The upside could send this market looking towards the 1.42 handle, which is the major resistance barrier that shows up on the weekly chart as well. Nonetheless, I do not have any interest in buying at this point, because it is simply far too overextended. I would love to see some type of pullback in order to get involved, and therefore pick up a bit of “value” in a market that is so clearly bullish. Furthermore, when you look at the British economy, the fact that we have seen so much in the way of vaccinations should continue to propel the British economy going forward in relation to other ones. Furthermore, we have the stimulus coming out of the United States that could continue to work against the US dollar.
All things being equal, the 50 day EMA is reaching towards the 1.4250 level, that could offer a bit of a “floor the market” as well. In other words, I think this is a market that cannot be sold anytime soon, at least not until we break down below the 1.37 handle which would be a complete collapse of the most recent shot higher.
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