- During the trading session on Thursday, we have seen the British pound rallied quite significantly, but at this point in time it also looks like we are struggling with the same resistance barrier that we have been dealing with for some time.
- I think at this point in time, the market will face a lot of noise between the 1.25 level in the 1.26 level above.
At this point, I think you have a situation where traders will continue to pay close attention to the bond market. It looks like interest rates are pulling back a little bit in the United States to weaken the US dollar for the short term, but over the longer term, it’s very likely that we will see the British pound soften a bit. We could see some exhaustion coming back into the market rather soon. However, it’s also worth noting that we are through most of the fundamental announcements for the week, so I think we’ve got a situation where the next day or 2 could tell us a lot. After all, if there is no fundamental reason for the British pound to suddenly weaken or give up some strength, it tells you how weak that Sterling really is.
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On the Other Hand
On the other hand, if we were to continue to go higher and break above the 1.26 level, then we are going to be fighting the 200 Day EMA. The 200 Day EMA is a large technical indicator that a lot of people pay close attention to, and some people even base the entire trend on this indicator. If we were to break above there, then it’s likely that the market could go looking to the 1.2750 level after that.
That being said, I don’t necessarily think we are going to break above there but if we did, that would obviously be a very bullish sign. At that point, I would anticipate that the US dollar is in serious trouble against most currencies, not just the British pound. However, when you look at the chart you can see easily that the market is still for the most part in a consolidation zone, so I think it makes a lot of sense that we fade this rally given enough time.
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