- The British pound has rallied quite nicely during the trading session and now finds itself threatening the 50 day EMA against the US dollar at this point we will be watching the 1.35 level.
- This is an area that is a large round psychologically significant figure and an area that previously had been important for the markets in general.
- The 50 day EMA continues to see a bit of it efficacy challenge.
And now it looks like we are trying to do everything we can to show signs of whether or not this selling pressure is going to remain in the market. We had previously broken below a major trend line. And now I look at this as a market. If we give up 1.31, the pound is going to collapse.
Heads and Shoulders?
You can somewhat make an argument for a head and shoulders pattern that we had broken down and now we’re just simply retesting it. But what I suspect is this is a market that’s more or less showing a lot of indecision. I don’t like shorting the pound quite yet, but on signs of exhaustion, I might throw a small tester out there, a small position, just to see how it plays out. If we can break above the 1.36 level, then I think the pounds have got much further to go.
The biggest problem with trend lines, of course, is you can always draw them in a different direction. So, they’re only one tool that you can use. So, for example, if you take a trend line from March, you can say we just bounced off of it. If you take a trend line from basically the beginning of the year, then you can make the argument that we broke through it several sessions ago, we may have to go up and test it again. I still think there’s a bit of a ceiling above, so I’m not ready to start buying quite yet.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
