I will not hesitate to buy a breakout above the recent highs, because the risk-to-reward most certainly favors doing so.
The British pound continues to look very bullish, as we continue to hammer against the 1.42 level. The Americans were not trading during the day on Monday, so a little bit of hesitation later in the day should not have been a surprise, but I do think that it is only a matter of time before we finally get the breakout. Once we get above the 1.4233 level, then it is likely that this market will go looking towards the next psychologically important figure, the 1.45 level.
In the meantime, I look at pullbacks as potential buying opportunities, just as we had seen during the trading session on Friday. Underneath all of this, the 1.41 level is supportive and most certainly the 1.40 level is as it is also a large, round, psychologically significant figure, and an area where we had previously seen a certain amount of resistance, which should now be supportive based upon market memory. Further adding to the support is the 50-day EMA reaching towards that same area as well.
If we break down below the 1.40 handle, then we have quite a bit of work to do as far as figuring out where to go next, due to the fact that we have seen such a move to the upside. After all, if we were to fail again at the 1.42 level, one would have to think that a certain amount of the traders out there would be thinking “double top”, which is very bearish. Nonetheless, it certainly looks as if in the short term we most certainly have quite a bit of bullish pressure, and it is difficult to go against that.
The next couple of days could be somewhat choppy, though, because we also have the all-important jobs number on Friday, which has not been factored in yet. There is a lot of uncertainty when it comes to employment in the United States, so that will have its say when it comes to the US dollar obviously. With this, I remain bullish, but I also recognize that choppy and somewhat sideways behavior could very well be what we see most of the week going forward. I will not hesitate to buy a breakout above the recent highs, because the risk-to-reward most certainly favors doing so.