- Signs of exhaustion in this pair continue to be opportunities, as the markets have so closely followed this area for set-ups.
Potential signal
- I am selling this pair below 1.3450 with a stop at 1.3550 and a target of 1.3310
The US dollar continues to be very noisy, and the British pound, of course, has taken advantage of that during the trading session on Thursday. However, I find that we are sitting just below the crucial 1.35 level yet again, an area that’s been a ceiling.
Signs of exhaustion at this point in time, for me at least, are going to be selling opportunities. It’s not that I won’t buy the British pound, and it’s not even that I think the British pound is in trouble; it’s just that when the market tells you an area is difficult to get above, you need to stand up and pay attention.
With that being the case, I am looking for selling opportunities, probably on short-term charts, but anything below 1.3450 for me suggests that we’re probably going to drop towards the 200-day EMA.
The alternative scenario is that we rally and break above the 1.36 level. In that environment, I think we go looking to 1.37, although I’m not looking for an explosive move; I’m looking for more of a grind to the upside.
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Opportunity for Short-Term Traders
Overall, this is a market that will continue to be somewhat noisy, but I think there is an opportunity here for short-term traders. I don’t want to get too huge into my position. I think this is just another trading instrument that’s offering a nice range, like maybe oil does right now, and of course, the Euro, and so on.
So, with all of that being said, I do think that the Bank of England being a bit stubborn does help the pound, and perhaps the pound doesn’t lose as much traction against the US dollar as some other currencies could.
But if the US dollar strengthens, then I think we’ve probably got 150 pips or so to the downside. If the US dollar falls apart against everything, then of course the pound will rise and go looking at higher levels. As the expression goes, if you get the US dollar correct, you get most things correct.
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