EUR/USD
The EUR/USD pair broke higher during the course of the day on Wednesday, as we tested the 1.12 level. Ultimately though, there is quite a bit of noise above that could offer resistance. On top of that, even if we do rally from here I am a bit suspicious of any rally as the European Union has quite a bit working against that the moment. I recognize that the Federal Reserve should continue to find it difficult to raise interest rates anytime soon, but at the end of the day the European Union has to worry about much larger questions. Because of this, I am more than willing to step on the sidelines and wait for some type of exhaustive candle to start selling again.
GBP/USD
The GBP/USD pair initially tried to rally during the course of the day on Wednesday, but turn right back around to form a shooting star. The shooting star of course is close to the 1.30 level, an area that begins a massive amount of support. I think there is more than enough support between here and the 1.28 level below to continue to cause quite a bit of volatility. I believe that a break down below the 1.28 level is massively bearish, and at that point in time could not only sell this market, but become aggressive in doing so.
I think that the more likely way to trade this market is to simply wait for rallies that show signs of weakness, and then start shorting again. I believe that the British pound will continue to struggle overall, and of course the US dollar will continue to work as a bit of a “safety trade”, as the United States at least offers the safety of the treasury market. At this point in time, there are far too many questions involving the United Kingdom for people to hang onto the British pound.
