The British pound initially tried to rally on Tuesday but found a ton of resistance near the 1.3125 level.

This was exacerbated by the less than stellar CPI numbers coming out of the United Kingdom. Because of this, we felt towards the 1.30 level, which was previous resistance. I think if we can continue to stay above the 1.30 level, the market should rebound that given enough time.

However, I think that the markets will probably be tough to deal with over the next several sessions. I think if we can continue to stay above the 1.30 level, we will then go looking towards the 1.3450 level above. Because of that, I think that the market will continue to find plenty of volatility, but I still believe that there is a general upward bias over the longer term.

Buying pullbacks, but cautiously

I’m a buyer of dips in this market if we can stay above the crucial 1.30 handle. I think that it will be very difficult, but the overall upward mobility of the pair seems to be rather stringent, and I believe that the market will eventually reach towards the 1.3450 level which has been massive resistance in the past. A break above their senses market much higher, but in the short term I think we are trying to find the top of the consolidation area as a result.

I have no interest in selling this pair until we break down below the 1.29 level, which would show complete capitulation of the bullish bias in this market. A breakdown below the 1.29 level should send this market down to the 1.28 level rather quickly as it would be a complete turnaround in the attitude of this currency pair and should attract a lot of attention.

Editor’s Note: Equity investors/traders can use the Currency Shares British Pound Sterling Trust (FXB, quote) ETF to take positions in the yen without a FOREX account.  The ETF looks to track the price of the British Pound Sterling (GBPUSD), minus ETF fee. The fund seeks to reflect the price of the British Pound Sterling (GBPUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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