The British pound shot straight up in the air on Wednesday to reach towards the 1.3350 level. This is an area that begins significant resistance, so I am looking for some signs of exhaustion that I can short into. I believe this runs into the 1.34 handle, so as long as we do not break out above there, it is likely that the sellers will eventually return.
Quite frankly, I believe that the market is probably going to be one that is more sideways than anything else, even though this was a heck of a move during the day on Wednesday. From a longer-term standpoint, it is easy to see that we are at the top of a range that extends down to the 1.32 handle. At this point, I would not be surprised at all to see this market head back towards the midline, which is basically the 1.33 handle. Whether or not we can break out between now and the end of the year is a completely different question, but right now I just do not see it happening. The US dollar will continue to be the main driver of where we go next, despite the fact that the British pound was very strong for the day. The market continues to see a lot of choppy behavior, so you are better off using small positions and trying to play the range unless we are finally told something else. If we can get a daily close above the 1.34 handle, then it is possible that we could go higher but right now I do not see that happening.
If we were to somehow break down below the 1.32 handle, then it opens up a move to the 1.30 handle below which is a large, round, psychologically significant figure and an area that has been important in the past. In general, I would not get too aggressive one way or the other in this pair or any other for that matter, at least not until we get through the jobs report next month. The British pound is a little overdone in the short term, so I will drill down to the hourly chart to look for exhaustion to take advantage of.
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