The British pound recovered quite nicely during the trading session on Thursday to reach towards the 1.3750 level, an area that previously had been supported. When I look at this chart, I believe that the area between the 1.3750 level and the 1.35 level is going to be very noisy, and therefore somewhat supportive. With that being the case, it is not a huge surprise to see that we have had a little bit of a bounce, but the US dollar has been strengthening based upon a whole slew of factors, most of which have nothing to do with this pair, although the effects of that certainly will be felt here.
The 50 day EMA sits just above at the 1.3797 level, and I think that will be your next resistance barrier. If we break down below the lows of the last two days, then it is likely that the market will start to pick up momentum to the downside and go looking towards 1.35 handle. I do believe that the 1.35 level will be relatively important underneath, and I would anticipate that there should be a certain amount of support there regardless. Furthermore, the 200 day EMA is starting to reach towards that area, so that will be yet another reason to think that the area holds. Obviously, if it does not hold, then it could be very bad news for the British pound.
In general, I think that the US dollar could strengthen against quite a few currencies, including this one. However, I think that the British pound is stronger than many of the other currencies around the world, so I would only be somewhat bearish about this market, so I think it is probably only a matter of time before I am buying US dollar against other currencies, but I may sit on the sidelines when it comes to this pair.
I think at this point we will probably continue to see a lot of choppy behavior, and with that I think it is probably best to leave this market alone, but it is worth noting that we broke down below an uptrend line and it now looks as if we are trying to go sideways, which could be the beginning of something bigger to the downside. Having said that, it is all about being cautious at this point.
