The British pound has rallied significantly during the trading session on Wednesday but continues to see a lot of resistance at a major downtrend line. The downtrend line has been like a brick wall for this market, as we have seen several attempts to break to the upside but only to see failure yet again. That being said, it is not as if xthe market is falling apart either, it is just simply a matter of trying to build up the necessary momentum to go higher.
The 1.39 level being broken above would be a very bullish sign, opening up the possibility of a move towards the 1.40 handle. The 1.40 handle has been a major barrier for quite some time and breaking above that would not only be bullish from that aspect of pricing, but also the fact that it would kick off a major “W pattern” being broken to the upside. Having said that, it does not necessarily mean that the market is going to make that move, just that it is completely possible. This would obviously have a lot to do with the US dollar shrinking, but right now it appears that we are comfortable hanging around the 50 day EMA more than anything else.
To the downside, if we were to break down below the 1.38 level, we could go looking towards the 1.37 level. The 1.37 level is an area where the 200 day EMA currently sits, so it yet another reason for this market to find buyers. I suggest that there is a major “support barrier” between the 1.37 handle and the 1.36 level underneath. Because of this, the market is likely to see a lot of buying pressure in that area, just as if we were to break down below that level, we would see a big flush lower. I anticipate that soon we are going to get some type of answer, but right now it looks as if we are simply going back and forth in a bid to try to build up enough inertia to make one move or the other. As things stand right now, it looks as if the sellers are holding firm more than anything else, so that does potentially come into play overall. The last couple of candlesticks certainly have favored negativity.
