At this point, I think we will continue to see a lot of noisy and choppy listless behavior, but quite a bit of resistance above.
The British pound rallied a bit on Wednesday, but has not made any real headwind one way or the other. it is worth noting that perhaps the British pound is still trying to come to grips with the previous selloff, and the bottom of the previous descending triangle. The 50-day EMA looks as if it is getting ready to break down below the 200-day EMA and the so-called “death cross”, so that could come into play as well. The death cross is something that we do not typically pay attention to for the most part, because it ends up giving a lot of false signals, but it is worth noting that other people do pay attention to it.
With that being said, I think that this is a market that will continue to struggle in general, and that is probably the best way to approach it. After all, the market has been consolidating in this area and has attempted multiple breakouts only to fail again and again. I think that continues to be the way forward, and it is not until we break above the 50-day and the 200-day EMA at the 1.37 level that I would consider buying. If that does happen, then I think we will probably have a scenario in which we could go much higher, perhaps reaching towards the 1.39 level, followed by the 1.40 level. However, I think it is much more likely that we will drop down towards the 1.35 handle as we have seen so much in the way of noise.
If we break down below 1.35, then the 1.34 level will be tested again and perhaps broken to allow the market to go looking towards 1.30 handle. I do believe that a lot of this will come down to the risk appetite around the world, and it should be noted that for a while now, the currency markets have been punishing the Bank of England for the idea of raising interest rates in a slowing economy, but we can only read so much into that. They have signaled that they will raise interest rates at the next meeting, but that can always change. At this point, I think we will continue to see a lot of noisy and choppy listless behavior, but quite a bit of resistance above.