The British pound rallied during the trading session on Wednesday as the 1.30 level continues to be a major support level. By doing so, the market continues to show this area to be important, but it is also worth noting that every time we rally it is a situation that we have not been able to continue going higher. Signs of exhaustion will continue to be jumped upon, as this is a market that has been very negative for quite some time, so it is also worth pointing out that we have seen a lot of “lower highs” recently. In fact, you can even make an argument that this is a descending triangle that is forming.
Underneath, there is a significant amount of support that extends all the way down to the 1.28 handle, which means that if we do break down below here, it is going to be difficult to continue the momentum, and I think a lot of what we are seeing here is a market that is going to continue to show signs of buying pressure, but whether or not that can overcome all of the selling pressure is a completely different question.
The 50 Day EMA sits at the 1.32 handle and is drifting lower. Ultimately, this is a market that I think continues to see a lot of momentum chasing to the downside as well. If we did break above the 50 Day EMA, then it is possible that we could see this market go higher, but really at the end of the day, I think this is a situation where we are going to show plenty of downward pressure until we can break above the 50 Day EMA at the very least, if not the 1.32 level. At that point, you could start to make an argument for a “W pattern”, but we are a long way from making that happen, and of course, we would need to see a daily candlestick close all the way up there. I think it is probably going to be easier to simply short this market on signs of exhaustion using a short-term chart, as I would not expect big moves at this juncture, at least not without some type of fundamental or headline announcement that gets people involved. The size of the candlestick is bullish as well, but short-term at best.
