The British pound rallied initially during the trading session on Wednesday but gave back the gains as the market has shown itself to be susceptible to a few words from Federal Reserve Vice Chair Richard Clarida, who suggested that there could be interest rate hikes as soon as 2023. That is quite a bit more hawkish than people would expect, but at the end of the day the Federal Reserve is nowhere near doing anything to tighten monetary policy.
Ultimately, the British pound continues to look at the 1.40 level as massive resistance, which is an area that has been a problem more than once, and I think that area should continue to hold. If we break down below the lows of the last couple of days, it is likely that the market will go looking towards the 1.37 handle, where the 200-day EMA presently sits. That being said, it is worth noting that the British pound has suffered at the hands of Clarida's speech just like the other currencies did.
If we were to break above the 1.40 handle, then it is possible that the market might go looking towards the 1.42 handle, which is a massive barrier on longer-term charts. Getting above there would allow the market to enter a long-term shot to the upside. That being the case, I think I would get aggressively long of the British pound. On the other hand, the most likely move is going to be to the downside. At this point, it is likely that we will continue to see a lot of negative headlines out there when it comes to risk appetite, especially as the jobs number during the trading session was not exactly a good sign either, as ADP missed by more than half. I just do not see any reason to get overly bullish between now and the jobs number, which I think would have a lot to do with the direction of the US dollar going forward. The market is likely to have an impulsive candlestick that we can follow, but that might be leading into the weekend as a potential longer-term move just waiting to happen.
