British pound brakes major weekly uptrend line

The British pound has broken down significantly below the uptrend line that has been such a stable of this market for so long. By breaking below this uptrend line, that is a very negative sign, and I believe that most of the summer is going to see US dollar strength. Things are starting the lineup for higher interest rates in America, so that of course helps the greenback. The British pound, the Euro, and the Swiss franc all look susceptible to dollar strength, and I believe now we will start to look for large, round, psychologically significant levels below.

Once we break down below the 1.35 handle, I think the market goes down to the 1.30 level over the longer term. That doesn’t mean that is can they go there in a straight line, but certainly the last 3 weeks have been extraordinarily negative in this pair. Obviously, the attitude of traders has changed, and I think that longer-term traders have to start thinking about negativity. I think short-term rallies could happen, extending to the 1.3650 level, but I would expect to see selling pressure in that region. Think of it as buying the US dollar “on the cheap.”

The markets will continue to be very noisy of course, but I think that the negativity has spoken for itself, and I think it will be continued based upon the ferocity of the selling off. That doesn’t mean that we won’t get a bounce, but that should be an opportunity to take advantage of value in the greenback.