British Pound Pulls Back Slightly

The British pound has pulled back just a bit during the trading session on Tuesday, as we continue to consolidate right around the 1.34 level. All things been equal, this is a market that is going to continue to see a lot of volatility, and of course choppiness because both central banks seem to be relatively tight with their monetary policy. After all, they are the two biggest central banks looking to tighten monetary policy, so it is a little bit of a push and pull back and forth type of situation. However, the US dollar has the advantage of being a safe currency, so if we do get some type of run towards safety due to geopolitical issues, the US dollar is going to win this argument.

GBP/USD Video 02.03.22

On the upside, I see the 1.35 handle has been an area of resistance that needs to be dealt with, especially now that the 50 day EMA is sitting there. It is also previous support that should now end up being resistance, so I think it will take a certain amount of momentum to finally break above there, perhaps some really good news coming out of the world.

On the downside, I believe that the 1.33 level continues to be crucial, and if we can stay above there, then the market has a significant opportunity to save itself and simply consolidate. If we break down below that level then the 1.32 handle is likely to be targeted next. I do expect a lot of choppy and noisy behavior, but it appears that the world prefers US dollars at the moment.

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