- The British Pound has rallied rather significantly during the course of the trading session on Monday, breaking above the 50 day EMA, and then the 200 day EMA after that.
- All things being equal, this is a situation where the momentum is certainly starting to pick up, and the 1.1280 level is offering a bit of a barrier.
- This area will continue to be watched closely, especially over the next 48 hours with a couple of British announcements including employment claims and GDP.
If we could break above there, then the market is likely to go looking to the 1.1375 level. The size of this candlestick, if we can hold it, is a good sign of momentum and I think short-term pullbacks will continue to be buying opportunities. The 1.12 level underneath is a significant support level and previously had been significant resistance as we have a lot of market memory in this area. Keep in mind that this is a pair that's highly sensitive to risk appetite as the Swiss franc of course is considered to be a safety currency while the British pound of course is considered to be a little bit more risk on at least in the face of the Swiss franc. If we do pull back from here and break down below the 1.12 level, then we have to pay attention to the 1.11 level.
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However, If We Fail There….
That's an area that should be support and giving that up would obviously be extraordinarily negative. In general, I do think that you are going to see a lot of volatility and therefore, I think you've got a situation where people are going to be cautious about their position sizing.
But I clearly think that the upside is favored in this pair because of course, at the end of the day, you get paid at the end of every session. And that of course works in favor of buying the pair for the interest rate swap.
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