I think we are trying to form some type of descending channel, although it is a very noisy one.
The British pound initially dipped a little bit during the trading session on Thursday, but then rose again as we continue to see an upward correction of the massive selloff. At this point, I still believe that the 1.36 handle is a major resistance barrier, so it is going to take the market breaking well above there for me to circuiting bullish again. The market is more than likely going to run into resistance sooner rather than later, but it is worth noting that the US dollar was overbought, so this correction is probably needed.
If we can break down below the bottom of the candlestick for the Thursday session, that would obviously be very negative, and could send this market much lower. At that point time, the market is likely to go looking towards the 1.34 handle. That was an area that we pierced and suggested to me that we could go lower, so if we turn around a break down below the 1.34 level, then it is likely that we could go looking towards the 1.30 handle. The 1.30 level is a large, round, psychologically significant figure, and I think it is probably going to take a while to get down there.
To the upside, if we were to break above the 1.36 handle, then we would tangle with the 50 day EMA as well as the 200 day EMA, both of which could attract a certain amount of resistance. Breaking above there then opens up a bigger move towards the downtrend line. By the time we get through all of that noise though, it is very likely that the market will change trends and we would continue going much higher. Keep in mind that the US dollar is probably the biggest driver of where we go next, and therefore you need to pay close attention to the US Dollar Index. A lot of what we had seen recently has been due to the selling off of the Euro, which has seen a little bit of recovery over the last couple of days. Nonetheless, it is very likely that we will see the dollar pick up strength again, so it is only a matter of time before you can get involved to the downside. I think we are trying to form some type of descending channel, although it is a very noisy one.