- I recognize that the 0.84 level has offered a significant amount of support, and at this point in time, I think you've got a situation where we are trying to bounce from an extremely sold off position.
- When you look at the longer term charts, the 0.84 level is crucial, and therefore, I think you've got a situation where we have a lot of market memory and therefore, we could have a certain amount of value hunting going on out there.
- The Bank of England, of course, is having an interest rate decision coming rather soon.
And in fact, the Thursday session will clearly have a major influence on what happens next. If the British sounds somewhat dovish, it's likely that we will get a shot higher from here. And this is most certainly an extremely low level from a historical standpoint, and therefore it could be the beginning of a massive swing trade higher. That doesn't mean it has to happen. Obviously, we can have a major breach of support but right now I'm starting to look in the other direction. That being said, this is a potential long term trade, not a quick situation, nor one I am willing to jump “all in” right away.
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Bank of England Meeting
We don't really have the momentum yet and I do think that the Bank of England meeting on Thursday very well could be the determining factor. If they shock the market and sound a little bit more dovish than people anticipate, that could be the beginning of something rather interesting. They are expected to cut the rate by 25 basis points down to 5%, but it will be the statement and the voting count and everything else like that that determines where we go next and determines whether or not traders believe that they are entering a longer term rate cut cycle.
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