- The British pound rallied significantly during the trading session on Monday, which is interesting considering that it was Martin Luther King Jr. Day in the United States, so liquidity would have been a bit of an issue. That being said, we are approaching an area that should be rather noisy, so I‘ll be curious to see how this plays out.
Technical Analysis
The technical analysis for this pair is rather negative, but the candlestick on the Monday trading session does suggest that perhaps we are trying to recover a little bit. All things being equal, the US dollar is overbought, and I also recognize that the British pound is oversold. Nonetheless, I think it’s probably only a matter of time before we turn things around and start shorting again, and the area between the 1.2350 and the 1.2500 level should be a massive barrier. Signs of exhaustion will get jumped on, as we can get “cheap US dollars” in that general vicinity.
Underneath, the 1.21 level is an area that I think a lot of people will be watching, as it has recently caused a significant bounce in the British pound. Nonetheless, I think it’s likely that eventually, this pair will drop. If and when it does, I have no doubt that I will be part of the trade as well. It’s not until we break above the 1.2550 level that I began to think about buying, because not only would we break above that entire range of resistance, but we would also break above the 50 Day EMA indicator, which a lot of people will be watching closely.
Ultimately, this is a pair that I think favors the downside, but it had gotten too far ahead of itself so I think it makes sense that we see a little bit of a bounce to balance the market back out. On the other hand, if we just simply plunge from here, a breakdown below the 1.21 level opens up the possibility of a move down to the 1.20 level.Top Regulated Brokers
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