The British pound rallied initially during the trading session on Thursday reaching towards the 50 day EMA before pulling back again. Ultimately, this is a pair that seems to be struggling near the 1.2350 level, so at this point I would be fully on board with the idea of shorting it for a small trade. I do not necessarily think that the market is ready to break down significantly but when you think about the British pound, you have to think about the coronavirus and the Brexit. The Brexit is still a major issue, despite what Forex traders will tell you over the last couple of days. The 50 day EMA obviously causes a lot of attention, so therefore I think it makes sense that we continue to fade just above. At this point in time, if we were to break above the 50 day EMA that could change some things, lease for the short term.
Looking at this chart, I do think that the market eventually go down towards the 1.21 handle, an area that recently had been supportive. That level being broken could open up the door to the 1.20 level, which would be a significant break down to say the least. I do think that eventually we could see that, quite frankly we needed some type of push at this point. It is worth noting that the British pound looks a bit soft against multiple currencies, not just the US dollar.
Based upon the candlestick, it does look like we are simply trying to consolidate and figure out where to go next. While it was a bullish candlestick for the day, the fact that we sold off late in the day also suggests that a lot of people are comfortable holding the British pound longer term. At this point it comes down to the next random headline coming out as to where we go next, because the machines have taken this pair over. In fact, for the last couple of years a lot of pundits that I time to refuse to deal with the British pound because it is so radically traded, mainly due to the Brexit situation. We are about to enter that scenario again, so you will need to be cautious about your position size as the trade going to get you could be very painful if you are not careful.