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British Pound vs US Dollar Technical Analysis
The British pound fell significantly during the course of the trading session on Wednesday as it looks like we are going to continue to threaten a major breakdown. Underneath, if we can break down below the 1.20 level, we could continue to drop much further. We are in the midst of a bearish flag, and therefore it’s likely that we continue to see traders pay attention to this technical setup. If we do breakdown, the 1.20 level is likely to be a major battlefield, but if we break down below there, then it’s likely that we go down to the 1.1850 level, an area that has been significant support.
On the other hand, if we turn around and break above the highs from the Tuesday session, we could go racing toward the 50-Day EMA, which of course will offer a certain amount of technical resistance, and I suspect that a lot of sellers will get involved in this market. Short-term rallies at this point will continue to see plenty of sellers, and therefore I think it’s probably only a matter of time before sellers come back in and try to take advantage of “cheap US dollars.” All things being equal, this is a market that I think will continue to be very noisy but given enough time we probably have to come to a longer-term trend just waiting to happen.
The market is one that I have no interest in buying, and if we do get some type of bounce after the Federal Reserve statement or meeting, I am willing to start shorting this market on rallies at the first signs of trouble, just as I am willing to short this market if we break down. I have no interest in buying anytime soon, at least not until we break above the 200-Day EMA, which is very far from here, therefore it’s not even the thought at this point. All things being equal, there’s so much in the way of negativity out there that it makes sense that the US dollar continues to attract inflows. The overall attitude of markets is still one of concern, and that of course will not help Sterling.
For a look at all of today’s economic events, check out our economic calendar.
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