The technical picture improved for the daily September British Pound on Tuesday when the currency broke through a pair of former tops at 1.5767 and 1.5773. The move wasn’t met with much enthusiasm, however, as it entered a potential resistance zone bounded by 1.5771 to 1.5890.
The market also remained inside of a triangle chart pattern which could continue to compress prices. The resistance line of the triangle drops in at 1.5876 today. The support line is at 1.5551. Short-term Gann angle support is at 1.5715.
Although the breakout move is promising for further upside action, the lack of volatility could mean the currency is poised to straddle the 50% price level at 1.5771 until additional buyers decide to support it.
Fundamentally, a weaker U.S. Dollar was most likely the reason for theSterling’s rally. There are still some lingering concerns about theU.K.economy and further stimulus action that could be keeping traders are on the sidelines until they get a little more clarity as to the Bank of England’s next move.
So while positive developments from the European Central Bank may continue to give the British Pound a boost, economic uncertainty may be setting up traders for another selling opportunity now that the market has reached a retracement zone.
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