The British pound initially dipped during the trading session on Tuesday but found enough buyers to break back above the 50 day EMA and then reach into the range between the 50 day EMA and the 200 day EMA. We are currently trading around the 1.25 handle, an area that this is a large, round, psychologically significant figure, so, therefore, will attract a certain amount of attention.
The British pound is exceedingly difficult to trade at times. This is true especially now, due to the fact that we have the British economy starting to open up, as many others around the world have already done. Beyond that, we have Brexit to worry about and that is going nowhere as per usual. At this point, the base case scenario has to be for a “hard Brexit”, but I do not think the market is trying to price that in quite yet, because the market has been bailed out through delays more than once in the past.
Looking at this chart, I think that the 200 day EMA above is going to cause some issues, which is basically at the 1.26 level. Above there, then the 1.2750 level offers resistance as well. The market is likely to see sellers sooner rather than later, so I’ll be looking for a selling opportunity if we get some type of exhaustive candlestick. However, I will probably require a daily candlestick that looks like a shooting star or something like that in order to get short. As far as buying is concerned, I would do so above the 1.2750 level, on a daily close. Because of this, the market is likely to see traders try to reach the 1.30 level above. Breaking above there would be a major breakout but I just do not see it happening quite yet. With all that being said, I think if you are patient you should be able to pick up US dollars “on the cheap” given enough time. We have seen a lot of volatility in general, but the US dollar looks like it has a little bit of ground to give against many of the other currencies. Ultimately, I think the British pound has a lot of things to worry about, so it is only a matter of time before it rolls over again. A little bit of patience is what will be needed.