The British pound has gone back and forth during the trading session on Thursday, but you should keep in mind that it was Thanksgiving in the United States, suggesting that there would have been a serious lack of liquidity. Ultimately, I think this is a market that you need to be cautious with, because it is a little bit oversold, but it is not nearly as oversold as some of the other major currencies such as the Euro.
Any bounce at this point in time will probably continue to face a lot of trouble above, especially near the 1.34 handle assuming that we can even get there. That is an area that previously had been supportive, but we have now broken through a couple of times, so therefore any short-term bounce is simply going to offer a nice opportunity. Signs of exhaustion will get sold into, just as we have seen during the Thursday session.
On the other hand, if we break down below the bottom of the candlestick for the trading session on Thursday, then it opens up a move towards the 1.33 level, and then beyond. Longer-term, I have a target of 1.30, but I think it takes a while to get there. The British pound has been a little bit more resilient than some of the other currencies out there due to the fact that the inflation rate in the United Kingdom has been higher. However, the Bank of England recently has disappointed the markets by remaining rather dovish in the face of that inflation. Because of this, I think it is only a matter of time before we see more disappointed for sterling going forward, especially as the Federal Reserve has decided to tighten its monetary policy via a pullback of the bond purchase program.
Furthermore, we have a lot of concerns out there when it comes to the overall global economy, that does make people run towards the US dollar overall. All things being equal, this is a market that I think will show a lot of noisy behavior more than anything else and that typically favors the safety currency such as the US dollar. There has been a recent break down of structure, and that of course is something that you need to pay close attention to.
