- The British pound initially tried to rally during the day on Monday but has given back the gains to show hesitation to breach the major resistance barrier just above in the form of the 1.2750 level, an area that has proven itself to be worthy of note more than once.
- Over the last month or so, the market just simply has not been able to break above there for any significant rally.
At this point, we need to turn our attention to support underneath which will be found closer to the 50 day EMA. The 50 day EMA is near the 1.2615 level and is rising. This is an area where I think you would see a lot of technical traders getting involved, as we have seen support their previously anyway. All things being equal, this is a market that I think is trying to build up enough pressure to the breakout to the upside, or perhaps give up momentum altogether. At the end of the day it all comes down to one major thing, and that seems to be the Federal Reserve anticipated rate cuts.
US Yields Rule Everything
The 10 year yield in the United States continues to be crucial, and therefore we need to pay attention to whether those rates are rising or falling. As it was Martin Luther King Junior Day in the United States, the bond markets were closed, so it was just limited futures traders that we had seen in a handful of hours. All things being equal, this is a situation where I think we continue to just go back and forth and at this point could lead to an explosive move. That’s essentially what I am picking the British pound price as one of the potential signals going forward, because it is coiling up into so much inertia that I think once we finally do breakout of the overall consolidation area, this market could really start to move rapidly.
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