The British pound has initially tried to rally during the trading session on Friday but turned around to show signs of weakness as we raced towards the support level underneath in the form of 1.36. This is an area that has been important more than once, extending down to the 1.35 handle. That being the case, the market is likely to continue to see a certain amount of buying pressure underneath, and I think it is only a matter of time before people start to take advantage of this market and its larger uptrend. Ultimately, I think that we go looking towards 1.3750 level in the short term, and then after that go looking towards the 1.40 level.
GBP/USD Video 18.01.21
Looking at the chart, the 50 day EMA sits underneath the 1.35 handle, and it looks as if it is trying to break above there rather soon. That should continue to offer a bit of dynamic support as longer-term traders tend to pay close attention to it as a potential trend defining indicator. All things being equal, this is all about the US dollar losing strength with massive amounts of stimulus expected, which of course has people concerned about the budgetary issues in the United States.
This pullback should be thought of as a potential “buy on the dips” type of situation, giving people the ability to pick up value as we go long. We have been in an uptrend for some time and it is worth noting that the British pound is historically cheap when looking back over the last several decades. Now the Brexit out of the way I believe that we will continue to see this move higher over the longer term.
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