The British pound initially fell on Monday but then turned around to jump back above the 1.32 level. This is an area that has been important multiple times, so it should not be a huge surprise to see that we have defended it yet again. Whether or not it continues to defend this area might be a completely different question, but when I look at this chart it does not take much in the way of imagination to think that perhaps we are going to continue to see support just below the 1.32 handle, with resistance somewhere near the 1.3350 level.
Looking at this chart, I think it would take a lot to get above the 1.34 handle, but if we did it would be a very bullish sign. It should be noted that the 50 day EMA sits right there as well, so that being said it is likely that we would see quite a bit of resistance based not only upon the fact that we have already seen this area offer significant resistance, but also the fact that a lot of people will be paying close attention to the indicator as it is so often followed. In general, one thing that I would point out is that the hammer candlestick suggests that the selling pressure may be abating, but I do not necessarily think that we are going to turn things around.
It will be interesting to see how this plays out once we get back to work after New Year’s Day, but in the meantime, I think we will simply go back and forth in what has been a somewhat well-defined range. Because of this, it is likely that range-bound traders will eat this market out, but I would not get overly huge with a position, due to the fact that a lack of liquidity could cause issues, as we get significant spikes from time to time in the holiday season. This is a market that I think could be traded quite well on a short-term basis, but I would do so with about half of the normal position size just to protect myself from a sudden move based upon a headline or a simple large amount of positions being closed at the same time, something that is very possible this time of year.
