The British pound had been bouncing around in a triangle for a while, and as we broke down below the bottom of it during the trading session on Wednesday, it appeared that Thursday could have kicked off a rather nasty selling opportunity. The market has turned around to break above the 1.37 handle, and then above there to break above the 200 day EMA. As we are closing towards the top of the candlestick, then it is likely that we could try to go higher, but there is still an absolute ton of resistance just above that could come into play.
The 50 day EMA is starting to curl lower, and of course we have a major downtrend line which still has not been broken. In fact, you could even make an argument for a descending triangle instead of a symmetrical triangle that I have drawn, so I still think that the momentum is with the sellers more than anything else. I do think that at this point in time it is only a matter of time before the sellers come back, but this candlestick is very bullish from a short-term standpoint.
Underneath, we have the 1.36 level offering significant support. The market breaking down below that level could open up a move down to the 1.35 handle, perhaps even a move down towards the 1.30 handle over the longer term. Obviously, that would be a huge turnaround in the fortunes of the US dollar and the British pound, but it is something that the technical analysis still suggests is very well possible to happen.
If we were to break above the 1.39 handle, then I think the British pound could really start to take off to the upside. Obviously, we would have to see a significant change in attitude and a significant amount of momentum coming into the picture, but it should be noted that Thursday was a very good start for that to actually be the case. The market certainly looks as if it has a lot of noise just ahead of it, so that is something that should be kept in the back of your mind, and therefore you should keep your position size appropriate for market that could turn around on you rather quickly. That being said, sudden and impulsive moves are still a real threat.
