The British pound broke down rather significantly towards the end of the month of October, reaching down towards the 1.27 handle, and more importantly breaking below the uptrend line, and that of course is a very negative sign. The 1.27 level is offering a significant amount of support as I write this article, but I suspect we will probably clear this area rather quick, and when we do I anticipate the 1.25 level will be the initial target.
However, if we were to turn around and break above the top of the candle stick for the final week of the month, the market could very well find itself heading back towards the 1.3250 level, but this of course need some type of catalyst to happen. Perhaps some type of good news coming out of the Brexit deal could be the catalyst, but right now it certainly looks as if we are more than likely going to see a lot of bearish pressure. The 1.25 level will of course be a lot of support, mainly because of the large, round, psychological importance of the figure.
The US dollar course has been strengthening anyway due to the higher interest rates, and I don’t think that the dynamic is going to change anytime soon. However, good news out of the Brexit will probably cause some type of significant “relief rally”, and therefore I would anticipate that the market would rip to the upside, not simply drift higher. I anticipate though that we are going to see more bearish pressure before we finally get that news, so therefore I suspect that most of the month of November will be more of the same that we have seen recently. Expect a lot of noise, but certainly it looks as if selling the rallies continues to be the direction.
