The British pound dropped early on Thursday, as there are a lot of concerns when it comes to risk appetite around the world.
The British pound has fallen during the trading session here on Thursday as we are piercing the 200-day EMA. The 200-day EMA being pierced is a negative sign, but we have seen this multiple times, so it is not a huge surprise to anticipate that maybe we see a little bit of a bounce here and there. With that being the case, I think you have got a situation where traders continue to see a lot of back and forth and I do think that it is probably only a matter of time before we bounce, but I also recognize that it is probably only a matter of time before we sell off again.
Range Expectations and Potential Breakouts
In other words, I think we stay in the same region we were in between 1.35 and 1.3250. If we do break out, the measured move is for 250 pips, meaning that we would go to the 1.30 region on a down move or close to it. And if we go to the upside, we will go to the 1.3750 level. Both of these are areas that have been tested before, so it lines up quite nicely.
We are in an environment that is very risk-sensitive at the moment, and I do think you need to keep that in mind. With that being the case, I prefer to go short when we get a little bit of a rally. The British pound may be a little bit more resilient than other currencies, though, as the Bank of England is probably stuck with a significant amount of inflation if energy prices stay strong. So, a little bit of a moving target, but as things stand right now, I think we stay in this same range.
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