- The British pound pulled back just a bit during the trading session here on Wednesday as we are testing the 50-day EMA.
- The 50-day EMA attracts a lot of interest, and if we were to break down below there, I think you've got a situation where markets really start to pull apart.
- If they do, then I think the US dollar could start to strengthen not only against the British pound, but other currencies as well as the British pound has been one of the biggest winners.
All things being equal. If we break down in the pair here, the 1.3, two five zero level is an obvious target followed by the 200 day EMA. I think at that point, you'll probably see the Euro, the Canadian dollar, some other currencies just get absolutely hammered by the greenback.
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If the market were to turn around and break above the 1.36 level, then I think that opens up the possibility of the pound really taking off, perhaps going to the 1.38 level. The U.S. dollar will be greatly influenced on Friday by the speech by Jerome Powell at Jackson Hole, Wyoming. And I think you've got a situation where the market will continue to see a lot of questions asked of it.
But I think if we break down here, my trade's actually going to be to short other currencies against the US dollar. If we start to see strength here, then I'd probably buy this pair. It's not that I wouldn't short this pair. I just think that it's an excellent signal for other currencies. And with that being the case, I think you have to keep in the back of your mind that although you can trade it, you may get a little bit more mileage out of your trade in other currencies.
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