The British pound gapped higher at the open on Monday, and then reached to the 1.2750 level.

We pulled back a little bit though, and found support at the 1.27 level, and now find yourself going sideways in general. I think that will probably be the case for a while, just because the market has so many things to worry about when it comes to the British pound, and of course the negotiations between the United Kingdom and the European Union.

I think that the market will find plenty of reasons to be volatile, so you need to be very careful. If we can break to the upside, that should send this market towards the 1.28 handle, and perhaps a break above there. A break above there should send this market to the 1.30 level.

Longer-term buy on dips

I believe that longer-term we will rally, and I am a buyer of dips. However, the market should continue to be choppy, so I think that the opportunity to go to the upside will present itself occasionally, ultimately, I think that the market is probably going to go looking for the 1.3450 level, but it is going to take quite a bit of momentum building to get to that area.

Longer-term, I do think we get there, but there should be plenty of opportunities to pick up short-term dips as value, and continue to take advantage of the more hawkish than anticipated tone coming out of the Bank of England. Ultimately, this market should offer a lot of short-term trading, and then perhaps the ability to build some type of core position that you can add to. I like the British pound longer term, but recognize that small positions will probably be the best way to avoid serious trouble.

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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