The British pound has rallied significantly during the trading session on Friday, as we continue to see a lot of money flow into the British pound. There seems to be a lot of hope out there that the Brexit is either going to be avoided or there is no way that a “no deal Brexit” can’t happen, but clearly one is getting ahead of themselves if they are throwing a lot of money into this market. The 1.25 level will attract a lot of technical resistance, so it would not surprise me at all to see sellers step in here. After all, we have seen a lot of noise in this region and therefore a lot of order flow. Order flow equals resistance.
We are a bit overextended recently, but this explosive move is a good sign that we are going to make a significant fight out of it. If we can break above the 1.26 level then the 200 day EMA comes into play, which is painted as black. That is also an area that could cause a lot of trouble and send in selling pressure. Overall though, one has to feel that it’s only a matter time before the British pound runs in the serious trouble and it’s simply a waiting game for those who are trained trading, which is how I choose to play this market. Granted, you could have made decent gains to the upside recently but at the same time you can also make an argument that one headline could send it all right back down, and let’s be honest here: it’s only a matter of time before that headline comes.
The Federal Reserve is likely to cut interest rates so that does help elevate the pair just a bit, but if the Federal Reserve underwhelms then it’s very likely that this market breaks down as well. With that in mind, pay close attention to signs of exhaustion, as it could give a hint as to where we fall from here. To the upside, we need to break above the black 200 day EMA to show signs that we are going to continue going higher. That being said, I do feel it’s only a matter of time before the sellers come back in. Even though there has been a lot of short covering as people worry about good news coming in and messing of the trade.
