This pair has been very resilient over the last several weeks as the markets continue to worry and fret over the various issues in both Europe and China. The possibility of a global contraction certainly hasn’t done much for the risk appetite out there, and under normal circumstances, we would see this pair fall. However, that hasn’t been the case as much lately.
The pair has seen a nice move higher over the course of the last couple of months, but the last two weeks has seen a nice pullback. During the Monday session, we did see a bullish candle, so it looks as if the pair is trying to find its legs at the moment, and that the buyers have reappeared.
The pair features the Pound, which looks likely to have the issue of inflation attached to its economy while the US dollar doesn’t have this problem at all. In a normal setting, we could see a bit of a rate hike by the Bank of England long before the Federal Reserve will do so. However, these aren’t normal times, are they?
1.6050
The 1.6050 level was once resistance, and it is now being tested as support. The candle for the Monday session bounced nicely off of the level, and the market looks as if it is trying to find buyers at this point. The move, if successful would be a simple series of breakout, pullback, and continuation.
The candle for the session did give back a little bit of the gains, but the placement is very interesting to me. I think that we could see a real attempt to rise in this market, but there could be a problem with headlines at any moment. I don’t as a general statement like selling the Dollar at the moment, so I am going to be very quick to get out of any longs in this pair if trouble shows up.
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The 1.6050 level should hold as support, and if it doesn’t we should see plenty of minor support area below that as well. This makes me not want to sell this pair as it is the path of least resistance to go higher as far as I can tell. On a break of the 1.61 level for a daily close, this could be the one place I actually can sell the Dollar.