The British pound rallied again on Wednesday to reach towards the crucial 1.35 handle. The 1.35 handle is a large, round, psychologically significant figure that a lot of people will be paying close attention to, and at that point I would anticipate seeing a bit of exhaustion. Nonetheless, this is the wrong time of year to get overly aggressive in any direction, so I think will have to see how the market behaves at the 1.35 level.
The size of the candlestick is somewhat impressive, especially considering the time of year it is. That being said, the market is going to be very choppy over the next couple of days but I do not want to put a bunch of money to work while playing liquidity games. The 1.35 level is a major figure that a lot of people will pay attention to, so keep an eye on how we close either above it or below it. The next couple of days will probably be about position squaring more than anything else, and I think that is going to be more or less a drift in both directions.
Every once in a while this time of year there is a huge move that you can take advantage of, but you have to trust me based upon my experience that it just does not happen enough to make it worth trying to bank on. Importantly, a lot of retail traders will come in and over-leverage their position trying to make a bunch of money off just a handful of pips. If and when that happens, it almost always ends up working against them. With that in mind, let us see what this does over the next couple of days and then start talking about getting set up for January and the risk appetite of 2022. The 50 day EMA underneath should offer support, so if we were to break down below that then I suppose we could probably start drifting lower, but beyond that I am not looking for much more than sideways back and forth and just nonsensical choppy behavior. The British pound has outperformed most other currencies, so one would have to assume that if we are going to have a move, it is probably going to be in this pair.
