The British pound has gone back and forth during the course of the week, showing signs of exhaustion after a huge move to the upside. The market going back and forth makes quite a bit of sense after this massive move higher, as we have seen the 1.36 level offer resistance, just as the 1.35 level underneath acts as support. All things being equal, this is a market that needs to digest some of these gains for a while, which is typical after a huge move like we have seen. Nonetheless, the British pound is historically cheap, so that is worth paying attention to. I think ultimately, we will go higher but we may have a little bit of work to do in the short term.
GBP/USD Video 18.01.20
The market continues to try to price and stimulus coming from the United States, which will weigh upon the US dollar in general. In fact, that might be one of the bigger drivers of this market going forward, not necessarily the need for the British pound to be bought based upon strength. All things being equal, I think we are more than likely going to go towards the 1.50 level over the longer term as we normalize a bit in the United Kingdom. Remember, markets tend to look into the future, so eventually we will start to price in the United Kingdom after the pandemic and of course after the lockdowns and vaccinations. I do not have any interest in shorting this pair, at least not anytime soon. This is a market that seems to continue to look towards higher prices given enough time.
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