The pound has been drifting lower against the dollar for most of December and during that time, despite finding firm support around 1.33, further losses appeared to be on the horizon.
The descending triangle that formed over the course of this month is typically a bearish signal, with a break below 1.33 being confirmation of this. On this occasion, that break never came, with the dollar sell-off over the last couple of days triggering a move above the triangle instead.
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With the pound not performing particularly well against other currencies, it’s clear that this is primarily a dollar-driven move.
There are a number of technical levels to watch out for, with 1.3550 offering initial resistance to the upside, with it having been the most recent peak at the start of the month.
Above here, there are a number of resistance levels between 1.36 and around 1.3650, a break above which would see the pair trading at its highest level since the immediate aftermath of the Brexit vote in June 2016.
Below, support can still be found around 1.33, although if we see a correction of the recent rally it’s worth keeping an eye on key Fib levels (38.2%, 50% and 61.8%) as well as the area around 1.34-1.3425, with it being the most recent area of support and resistance.
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