EUR/USD
The EUR/USD pair has pulled back initially during trading on Wednesday, only to turn around and form a hammer. The hammer shows that we continue to see bullish pressure underneath, and I think we will continue to do the overall consolidation that has been part of what’s been driving this pair for some time. Beyond that, it’s the wrong time of year to expect major moves as most large traders were away for holiday. I think that the 1.150 level underneath continues to offer a “floor” based upon longer-term charts, while the 1.1850 level above offer significant resistance. As this looks supportive, I think it’s time to go looking towards higher levels again. I be a buyer of short-term dips, but I’m not looking for a major move, just continuation of what we have seen.
GBP/USD
The British pound broke below the 1.29 level during trading on Wednesday which of course is a very negative turn of events. We have broken through a major support level, and I think we will probably see more pain going forward. Rallies are to be sold, but I do think that it’s only a matter of time before value hunters come back. When will that happen? The answer is simple: as soon as we get some type of certainty involving the Brexit. Until then, you can count on the British pound being volatile at best, and extraordinarily bearish at worst.
Markets like certainty, and even if it’s not a great deal for the United Kingdom, if something were to be agreed between the UK and the EU, this pair will turn around immediately. Beyond that, those who study these things understand that there is still a WTO agreement that both economies have signed, so at the end of the day everything reverts back to that. While I do think we go lower from here, certainly the easy money shorting this pair has already been made.
