The British pound has rallied again during the trading session on Thursday to continue its parabolic run. It is currently hanging about the 1.34 handle, and it is worth noting that the 50 day EMA has come into the picture now. Regardless, I think this is a market that more likely than not will have a bit of exhaustion ahead of it, especially as the holidays start to take over peoples trading.
The market pulling back from here would probably find support at the 1.33 handle, and most certainly the 1.32 handle. The market has been very noisy for a while, but I think at this point in time you have to look at it through the prism of whether it is trying to base, or are we trying to change the overall trend? I think a lot of this can be from right in the face of thin markets, and therefore the moves are a bit exaggerated. Ultimately, I believe we will pull back, but I am not willing to trade this currency pair at the moment due to the fact that it has gotten too far ahead of itself. I would not trust signs of exhaustion, because of course that could just be thin liquidity as well.
We are still technically in a downtrend, so that is something you need to keep in the back of your mind. However, I would prefer to start shorting a bit clearer of a signal, something that we just do not have at the moment. As far as buying is concerned, I would not chase this trade all the way up here, as that is a great way to lose a lot of money. I will be the first to admit that I missed this move completely, and therefore have to wait for a better set up. I do not see one right now with decent risk to reward ratio, so I am on the sidelines until after the Christmas holiday. At that point, then I will reassess everything with the particular interest in the early January trading, as it can give you a bit of a “heads up” as to how the British pound is going to trade for the year. Remember, traders need to put risk back on when it come back from holiday so that is why the first two weeks of January or so crucial.
