- The British pound initially fell during the trading session on Friday, but it looks like the 50-day EMA is in fact going to give it a little bit of support.
- This probably shouldn't be too much of a surprise because where does the strength in the British pound come from? It comes from America.
- So, the biggest thing here, I think, is the fact that US traders think that the US dollar falling is a good thing.
They are focusing on the fact that PCE numbers came out as expected. So, everybody still expects to see the Federal Reserve cut rates. Now, while that may be true, the reality is that the US dollar hasn't exactly imploded since we got confirmation by the Fed that they're at least thinking about cutting rates.
In fact, the massive candlestick from last week that was a result of this ended up closing right about where we are now. So, in other words, we've bounced around and not really gotten anywhere. Because of this, I think you have a situation where traders are looking at this through the prism of a market that is somewhat lost and confused, but it is trying to sort itself out. The 1.36 level above, I believe, is a significant resistance barrier, while the 1.34 level below is significant support.
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In the meantime, this is a market that is just simply trying to figure out where to go longer term. The fact that we are sideways at this point doesn't surprise me at all, mainly due to the fact that we are at the end of vacation season and a lot of institutional volume probably isn't there. Once we break out of this 200 point range, the implied move is 200 points either higher or lower, which means if we were to drop to the downside, we would go hunting for the 200 day EMA.
If we break out to the upside, you'd be looking at the 1.38 level, which was an area of resistance during the previous massive swing high. So, I think it all lines up quite nicely. But right now, this is a market that doesn't know where it wants to go.
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