- The British pound has initially tried to rally during the trading session on Thursday but gave back gains rather quickly against the Swiss franc.
- Ultimately, this is a market that is sitting right around the 50-Day EMA as well, so it does make a certain amount of sense that we would see technical support and resistance come into play here.
- Just below, the 1.10 level should offer support as it is a large, round, psychologically significant figure, and an area where traders have paid close attention to previously. That being said, there are a couple of areas where we may be looking to break above.
If we break above the top of the candlestick for the trading session on Thursday, it would be a bullish sign and could send the British pound reaching toward a 1.11 level above. After that, then we have the 1.12 level, which sits at the top of a previous consolidation area. The 200-Day EMA sits right around that same area as well, so therefore it does make a certain amount of sense that we look at that as a major barrier, so if we were to turn around a break above there, it’s likely that the British pound would go much higher. Ultimately, we have seen a nice rally, but we have rallied right into previous support, which does offer a significant amount of resistance.\
Looking to Short This Pair
If we turn around and break down below the 1.10 level, then it should send the British pound much lower, perhaps racing toward the 1.08 level over the longer term. While I don’t necessarily know that will happen, the reality is that there are a lot of geopolitical concerns out there that could make the Swiss franc more attractive than the British pound. After all, the Swiss franc is considered to be a “safety currency”, so therefore you need to think of it through that prism as well. Raking down below the 1.10 level may bring in a bit of momentum, and therefore it might be the “cleanest trade” set up.
Potential Trade: While I am not ready to put money to work in the spare quite yet, I do recognize that the 1.10 level is a significant barrier. If we break down below there and closed below there on at least a one hour candlestick, I will short this pair, aiming for the 1.0850 level, with a stoploss at the 1.1070 level.
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