The British pound initially tried to rally on Friday but gave back gains right around the same area where we had pulled back during the Thursday session. The Thursday session has been a massive shooting star, and now the Thursday candlestick looks as if it is trying to confirm that. Because of this, it is very possible that the British pound could pull back even further.
That being said, the 200 day EMA currently sits at the 1.3538 level, an area that also coincides quite nicely with the downtrend line, so I think that is probably your “floor in the market” at the moment. Ultimately, this is a market that I think will eventually see value hunters come back in on a pullback, but at this point I think it is likely that we will hear quite a bit of noise in this general vicinity. Ultimately, this is a market that I think will continue to move based upon the US dollar and perhaps the fact that we have seen so much in the way of bullish pressure that we do need to have a bit of a pullback.
That is the most common and most expected move. However, if we were to turn around and break out above the 1.3744 handle, that would clear all of that short-term resistance over the last couple of days and could send this market looking towards the 1.38 handle. That being said, the British pound is extended, so I do like the idea of a pullback in order to at least find some value. However, if we did break down below the 200 day EMA, then it is likely that we could go looking towards the 1.35 handle underneath, where the 50 day EMA is starting to reach towards. If we were to break down below there, then the market is likely to continue going lower, based upon some type of “risk off move” which we are starting to see in general at the moment. Whether or not the market can keep its nerve will have a lot to do with what happens next in the British pound. The British pound rallied mainly due to the idea of coronavirus being a thing of the past in the UK. However, there are a lot of other things going on at the same time.
