We have just broken down below the bottom of a major descending triangle, so that does suggest that the market has further to go to the downside eventually.
The British pound broke down significantly on Wednesday as traders are waiting for the FOMC meeting minutes to be released. At this point, the market has broken down through what would have been a potential “double bottom”, which shows extreme weakness. The British pound has been on its back feet for a while now, and this seems like we are about to see an acceleration to the downside. We have already seen this type of behavior by the greenback against the euro, and it now looks like the strengthening US dollar's “wrecking ball” behavior seems to be spreading out.
At this point, it looks like we will probably go looking towards the 1.30 level over the longer term, as I have been stating for a while now. Now that we have broken down below the hammer from the trading session on Tuesday, it is very likely that the 1.34 level will now be thought of as a bit of a “ceiling in the market”, and most certainly the 1.35 handle will be. It should also be noted that the market also probably had a little bit of liquidity issues due to the fact that Thursday is Thanksgiving in the United States, and that has a major influence on the US dollar movement as well.
It is because of this that I would probably ignore most of the Thursday candlestick, unless we get some type of massive move. That seems to be very unlikely, so any rally at this point will probably be a selling opportunity that I am more than willing to take advantage of at the first signs of exhaustion. Furthermore, we have just broken down below the bottom of a major descending triangle, so that does suggest that the market has further to go to the downside eventually. I do not have a scenario in which I'm willing to be a buyer of the British pound unless something changes drastically for the US dollar itself. If there some type of fundamental reason why the US dollar with suddenly weaken, then maybe I would get involved to the upside, but right now I just do not see that scenario, especially as the Federal Reserve is looking to taper while the Bank of England is light years away from doing anything remotely close to tightening monetary policy.