The British pound fluctuated during the trading session on Wednesday as we continue to look at the 1.38 level as somewhat important. Nonetheless, when you look at the overall attitude of the markets lately, we have formed a bit of an “H pattern”, and it looks like even though we did rally a bit in general, the market is more than likely going to continue to reach down towards the 1.36 level, an area that also coincides nicely with the 200-day EMA.
Looking at the 1.36 level, we have seen support multiple times there, so I do think it is probably only a matter of time before buyers would jump into that market. If we break down below that, it opens up a bit of a “trapdoor” towards the 1.35 handle. Breaking down below the 1.35 handle is an extraordinarily negative turn of events, perhaps ending the overall uptrend. If that happens, I anticipate that the British pound would probably drop all the way down to the 1.30 level.
It is interesting to see how this market is behaving, though, because the British pound itself has been one of the stronger currencies until recently, at least in terms of the way it behaves against the greenback. The US dollar has been strengthening, so although the market is likely to see a little bit more stability in the British pound than some other currencies, at the end of the day the US dollar tends to move in the same direction overall. With this, I think that the market will be very choppy and noisy, but as far as buying is concerned, we have a ways to go before I would put any money to work.
I need to see at the very least the highs from the Tuesday session to even think about going long, but I would be much more comfortable if we can break above the 50-day EMA, or even the 1.40 handle. If and when we can get above there, then it is possible that we might see the 1.42 level come into the picture, as it has been massive resistance multiple times in the past. If we break down below the 1.37 handle, for me it confirms the massive “double top” that people have been suggesting might be there.
