The British pound has rallied a bit during the course of the trading session on Thursday, bouncing from the 50 day EMA yet again. The market has been very tight for some time, and therefore it does make a certain amount of sense that the market would continue to see choppiness until we get some type of catalyst. The candle this could be presenting itself on Friday in the form of the jobs number, but that remains to be seen.
To the upside, the 1.40 handle above has been massive resistance multiple times, and I think it does offer a significant barrier. If we were to break above the 1.40 handle, then we could go looking towards the 1.42 handle. The 1.42 handle has been very difficult to crack over the last several months, and I think that will continue to be the case. If we were to break above the 1.42 handle, that would be the beginning of a bigger “buy-and-hold” type of scenario. While I am not confident that we will break above the 1.40 handle, you can make a serious argument for a bullish flag being formed right now, so pay close attention to that. If we break above the 1.40 handle, I would have to assume that to be the case.
On the other hand, if we were to break down below the 50 day EMA, then it is very likely that we go looking towards 1.37 level underneath, where the 200 day EMA presently sits and of course we have bounced from that general vicinity recently as well. I think at this point we will have to make some type of a decision soon, but what that catalyst will be is still going to remain to be seen.
The US Dollar Index and of course the 10 year note both should be paying attention, so what we are seeing is the market grinding away and killing time waiting for the next catalyst. Because of this, I am waiting for an impulsive candlestick that I can follow, and in the meantime, I think that this market will continue to be the purview of short-term traders who are simply going back and forth on short-term charts.
