The British pound fell rather significantly from the 1.26 level on Wednesday as we continue to see a lot of negativity. Ultimately, the strengthening US dollar is the main theme for the overall Forex markets as of late, and I think that will continue to be the case. After all, there are a lot of concerns out there that will continue to have people looking for safety, which means the US dollar.
The market breaking above the highs from the last couple of days would be able to sign, but we have to deal with the 50 Day EMA if we were to break above there. A move above that level could open up the possibility of a move much higher, but I think that the 1.30 level is an area where we would see a lot of selling pressure, as it was previous support. Ultimately, this is a market that is in a downtrend, and I think it’s only a matter of time before we would see the weight of the market come into the picture. The 1.30 level is an area that will attract a lot of attention, and I think that would be the top of any type of longer-term relief rally that would happen.
I’m looking for signs of exhaustion, such as the candlestick during the trading session on Wednesday, to get short yet again. Given enough time it’s likely that we will see the market reach the 1.22 level, where we had bounced from previously. If we can break it down below there, then it’s likely that we would see the market reach the 1.20 level underneath. The size of the candlestick for the Wednesday session of course is rather negative, and the fact that we are closing towards the bottom of the candlestick suggests that there could be a bit of follow-through during the trading session on Thursday. Either way, I have no interest whatsoever in trying to get longer this market, at least not until the fundamental situation changes. Right now, it’s obvious to me that the market will continue to struggle, and therefore I am looking for signs of exhaustion in every short-term rally to get involved. Pay attention to the US bond market, as the rate differential between the United States and the United Kingdom will continue to drive this pair.
