The British pound initially rally during the course of the trading session on Thursday but then turned around to show signs of exhaustion again. In fact, we ended up forming a shooting star that suggests we have a lot of volatility ahead of us. The market continues to see a lot of choppy behavior and of course we are still looking at the “death cross” as the 50 day EMA has broken below the 200 day EMA.
If we break down below the bottom of the candlestick for the session, then I think we probably go looking towards the 1.36 handle again. That being said, I think there is enough noise underneath that you have to be very cautious about shorting, at least until we break down below the 1.30 550 level. If we get down below there, then I would be much more comfortable shorting again. I think that the Friday candlestick will end up being rather important, and if we can break above the highs of the Thursday candlestick, that would probably be enough for me to start getting long. Furthermore, we have to pay close attention to the US dollar in general, as the market tends to move in one direction.
When you look at this chart, you can easily see that we have been in a downtrend for a while, and we have essentially just touch the apex of the descending triangle, before rolling over and struggling again. Because of this, I think that the market is likely to see more downward pressure than up, but again, I would not trying to short until we break through the short term support that has just formed. With this being the case, we are looking at a scenario where the overall market is going to be noisy for the next day or so, but once we clear one of these areas, I will be more than willing to put on a decent sized position. This is a market that you probably need to be cautious with, perhaps using that as an indicator as to what to do with other US dollar related currency pairs around the world. That being said, the market is likely to continue to see a lot of hesitation and indirection, so this is one of my least favorite set ups at the moment.
