The British pound rallied significantly during the trading session on Tuesday, reaching towards 1.23 level, pulling back significantly during the day, and then turning around to rally yet again as Jerome Powell promised Congress that he would save Wall Street, to paraphrase the entire conference during the day. All things being equal though, this is a market that has a lot of resistance above, so I do think it is only a matter of time before we see sellers get involved. After all, the British pound has a lot of things to worry about well beyond the normal currency out there. For example, the Bank of England came up with the brilliant conclusion that the United Kingdom was more than likely going to enter a severe recession during the day, which is an obvious reality. Furthermore, the 1.23 level above has a certain amount of psychological importance built into it, and that of course you have the question whether or not the Brexit is going to go off smoothly. I somehow doubt it.
The coronavirus numbers in the United Kingdom are much higher than other places, and although they are starting to open up the kingdom, the reality is that the opening in the UK will be much slower than other places. Ultimately, I do believe that this is a market that will eventually find sellers, but obviously we still have plenty of hope for the “risk on” type of sentiment out there, so do not be overly surprised if we have to find the 50 day EMA before selling off as well. With that in mind it is likely that it is only a matter of waiting for signs of exhaustion. I do not see that in the chart right now, so quite frankly you cannot get short yet. I would be a buyer heading into resistance though, after all it is a great way to lose money. In other words, there is not much to do here in the British pound and the next 24 hours. After the daily candlestick, I will continue to look at the market and try to make some type of decision, but right now all I see is a market that is trying to test resistance above. I also see a ton of resistance above, so you have to be cautious about trying to run headfirst into a resistance region like we have. In other words, we need to take some time.