- The British pound has pulled back just a bit during the training session on Friday, to break down toward the 1.2725 level.
- This is an area that previously had been important, so it does make a certain amount of sense that we could see buyers jump in and try to support this market based on “market memory.”
- Ultimately, this comes down to what’s going on with the US dollar and not so much the British pound, and of course on Friday everybody was panicking, so it’ll be interesting to see how this plays out next week.
The path forward
If we can break above the 1.2790 level, then I believe that the British pound will turn around to take off to the upside. If that happens, then I believe that the British pound could you look into the 1.29 level. After that, we have people running to the 1.3150 level, an area that has been in Porton more than once. With that being said, you need to be very cautious but I do think that given enough time we have a situation where traders will continue to look at this as a market that has recently broken out, and now the question will be whether or not it is a market that has any follow-through. As things stand right now, you could make an argument for it being a breakout and a retest just waiting to happen.
If we turn around and break down below the 50-Day EMA, then it’s likely that the British pound will collapse down to the 200-Day EMA, perhaps even as low as the 1.25 level. That’s an area that previously had been significant support, and anything below there would lead to a massive run toward the US dollar. There’s nothing on this chart to suggest that will happen anytime soon, so do be cautious when thinking about that potential move, and you certainly don’t want to throw a bunch of money to the short side right now. In general, this is a situation where we continue to see a lot of volatility but I believe eventually upward momentum.
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