The British pound has skyrocketed during the trading session on Monday as the British pound looks hell-bent on testing the 1.42 level. This is an area that was massive resistance, so I do not necessarily think we are going to simply slice through there. I anticipate that we will see some type of pullback, but that pullback should be thought of as a potential buying opportunity. After all, we have gotten a little overbought in a very short amount of time. Nonetheless, it does look like we are eventually going to break out as the US dollar seems to be in serious trouble. With all of this spending coming out of Washington DC, this should not be much of a surprise.

At this point in time, it looks as if the 1.40 level will probably offer significant support, so I would love to see some type of pullback in order to test that in and start buying again. After all, the US dollar is in serious trouble and it certainly looks as if the United Kingdom is going to be opening up to find plenty of momentum to the upside. If we can break above the 1.42 handle, then the next target for me would be the 1.45 handle, given enough time.

As far as shorting is concerned, I have no interest in doing so anytime soon. In fact, we would probably need to break down below the 1.35 level in order to have me thinking about going to the downside. That would obviously be a major shift in the overall attitude of traders around the world, so I do think will continue to go higher.

Technical analysis

GBP/USD bulls catch a breather around 1.4125, up 0.05% intraday, amid Tuesday’s Asian session. The cable jumped to the highest in 10 weeks the previous day, not to forget posting the biggest daily gain since April 19.

However, the heavy run-up propelled the RSI line close to the overbought region as the prices test the upper line of the one-month-old rising trend channel. Though, the quote remains well beyond the 1.4010-20 previous resistance area, crossed on Monday.

Hence, GBP/USD may witness short-term pullback towards revisiting the 1.4020-10 area but any further downside becomes doubtful.

If at all the bears dominate below 1.4010, they need to conquer the 1.4000 psychological magnet before challenging the 1.3865-60 support confluence including 50-day SMA and lower line of the stated channel. It’s worth mentioning that 100-day SMA and a rising trend line from December 11, 2020, add to the downside filter around the 1.3800 threshold.