The British Pound rallied a bit during the early part of the trading session on Wednesday, but just as we had seen on Tuesday, right around the 200-day EMA, it looks like we are seeing a bit of pressure.
If we can close on a daily candlestick above the 200-day EMA, then it opens up the possibility of a move to the 1.35 level.
To the downside, the 1.33 level continues to offer support. And I think ultimately going sideways does make a certain amount of sense, considering that the interest rate differential between these two currencies isn't that big. And there are enough fears out there that even though the United States has a lower interest rate, people will want dollars for that safety.
Ultimately, this is a market that, if you're a short-term trader, you continue to play around in this 200-pip range. And as we find ourselves close to the middle of it, right at the 200-day EMA, then it makes quite a bit of sense that we just chop back and forth. Ultimately, I think this is a market that is more or less for day traders.
US Dollar Indicator?
And I do recognize that the US dollar is stronger than most currencies at the moment. And while the British pound is a strong currency in and of itself, I think if you see this one falling, then you'll see other currencies, such as the Australian dollar, the New Zealand dollar, et cetera, will get hammered. So even if you're not trading the GBP/USD currency pair, it does make for a nice tertiary indicator as to what to do with the dollar.
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After all, if it can strengthen against the currency that has a higher interest rate than it, and of course, one that has been remarkably stable, then that means other currencies are going to have an extraordinarily hard time with the greenback. As things stand right now, though, I think this is a 200-pip range that we stay in.
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