In general, this is a market that will remain noisy, but if you take your time, you can take advantage of the overall trend.
The British pound has rallied a bit during the course of the trading session on Wednesday to reach towards the 1.31 handle. That being said, the Federal Reserve announcement obviously had an effect on the market, so now the question is whether or not they will continue to tighten? It is likely that we will see a series of interest-rate hikes, but it could have been worse.
That being said, the Federal Reserve also kept the door open to adjusting things, so this might be part of why we are seeing the British pound recover a bit. Regardless, the currency had been oversold, so it does make a certain amount of sense that we would see a bit of a bounce. The 1.32 handle above could be a bit of a resistance barrier, as there was a bit of selling pressure in that general vicinity. If we break above there, then the next target would be the 1.34 handle.
On the downside, the 1.30 level would of course end up being supportive, as it is an area that has been tested previously and of course, it is a large, round, psychologically significant barrier. Breaking down below that would obviously be a big deal, but it is clear that we could not do it initially. The market breaking down below there could open up the possibility of a move down to the 1.28 handle, which is also an area where we had seen support previously.
Simply put, I believe this is a market that you should be fading rallies, as there are a lot of concerns out there that will continue to be a problem. The market will continue to be looking for safety at times, and that means the US dollar. It is a simple matter of being overstretched at this point, so I do think that we probably are due for this bounce, and I will simply step to the side and wait to see whether or not I get an opportunity to pick up “cheap dollars.” I have no interest in buying this pair unless, of course, something changes fundamentally around the world and of course from the perspective of risk appetite. At this point, I just do not see that being the case anytime soon. In general, this is a market that will remain noisy, but if you take your time, you can take advantage of the overall trend.