The British pound fell during the trading session on Wednesday as we continue to see a lot of noisy behavior. Ultimately, this is a market that has been in a downtrend for quite some time, so it does make sense that we would turn around and continue to go to the downside. The 1.25 level is a large, round, psychologically significant figure that a lot of people would have to pay attention to, as it was noisy previously.
When you look at this area, you can see that we had previously seen a lot of noise here, and it could be thought of as part of a bearish flag, so with that being the situation, is likely that we would see noise. The market has a “measured move” down to the 1.20 level as far as the flag is concerned, so it does make sense that we would continue to go lower. The market continues to sell into rallies as the US dollar is by far one of the best-performing currencies in the world. Furthermore, interest rates continue to favor the United States, and that of course is a major driver of what happens in the currency markets.
If we were to turn around and take out the 1.26 handle, then it is possible that we could go higher. However, I would not necessarily think that is likely, especially after the action that we have seen during the day on Wednesday. Even if we broke above there, then you have to worry about the 50-day EMA, and then the 1.30 handle. The 1.30 handle is a major large, round, psychologically significant figure, and will attract a lot of attention if we were to bounce that high. The area had previously been supported, so it is likely that it would be resistant if we got to that level.
Every time we see signs of exhaustion, I will be a seller, just as a breakdown below the bottom of the candlestick for the day on Wednesday could send this market much lower as well. I have no interest in buying this market, at least not anytime soon and not without the Federal Reserve changing its overall tune. As long as we continue to be “risk-off” when it comes to market sentiment, the US dollar will attract inflows.
