British pound rallies on Wednesday

The British pound rallied significantly during the trading session on Wednesday, showing signs of strength and a bit of a relief rally. Ultimately, the 1.35 level above will be an immediate target, but if we can break above there, the market could then go to the 1.3650 level. Short-term pullbacks should find plenty of buying underneath, and I think that we are trying to turn around, at least for the short term. Longer-term though, I am starting to hear rumblings of a dollar shortage for global liquidity, and that could turn things around rather quickly when things fall apart. However, in the short term it looks as if the buyers are in control.

If we were to turn around and break down below the 1.33 handle, we could test the 1.3250 level, and then eventually the 1.30 level. Choppiness continues to be the problem in this market, and I think that the prudent trader will be small with their trading position, and then add once the market moves in your favor you can add to it. If we were to break above the 1.3650 level, that would be a very bullish sign and we could continue to go much higher. In fact, at that point I would become more of the longer-term “buy-and-hold” trader. I think the one thing you can probably count on it is a bit of volatility over the next several weeks. I think that the markets will continue to be short-term focused.