Looking at this chart, we’re obviously in a downtrend, so obviously I’d rather sell.
The British Pound had a very bullish Wednesday session, but during the day on Thursday we started to see that unravel a bit. Initially, the market took off higher, but then turned around to fall quite hard. In doing so, the market is showing how precarious the situation is for the British Pound bulls. The biggest problem is probably not so much the British pound, but rather the strength of the US dollar. After all, there is a lot of risk right now, and so this suggests that a lot of people will be rushing to the bond market or at least to the safety of the US dollar.
The 50-day EMA has been drifting for some time, looking very likely to approach the 1.32 level. The 1.32 level is an area that has been prominent before, so everything is tied for a potential upper in the market. That said, after Thursday’s action, I’m not necessarily going to hold my breath for that to happen. At the very least, there has been a bit of “shooting through the arc” of any rally going on.
Below that, the market broke through the 1.30 level at some point, and if we were to break below this candlestick, it’s likely that the market could hit the 1.28 level, although it has to be said that there is a lot of noise between level 1.30 and level 1.28. With all the prior noise in this area, I think it probably needs to hold as support if the pound has any chance of recovering from a longer-term perspective. On the other hand, if we break down from this point, I expect it to be very loud and lower.
Looking at this chart, we’re obviously in a downtrend, so obviously I’d rather sell. The market should break above the 1.32 level on the daily close for me to seriously consider buying, and until then I should assume that we are more or less looking into a situation where you are looking to dampen the rallies that show the first sign of exhaustion. Keep in mind that volatility has been very high in most markets lately, and this one might end up being like those.