The British pound tried to rally a bit during the session on Tuesday but then pulled back towards the 1.29 level. At this point, the markets very likely to continue finding buyers underneath, perhaps closer to the 1.28 level. The market isn’t quite ready to break out yet, but it is clearly winding itself up to build up the necessary momentum. Because of this, it is probably only a matter of time before we will break out and go looking towards the 1.33 handle above, and then perhaps even the 1.38 level above based upon the pole of the flag that we are currently forming.
Underneath, the 200 day EMA offers support, and it now looks as if the 50 day EMA is just a few days away from crossing above it, I think it is only a matter of time before the buyers jump in. I recognize that the UK elections are probably the next major hurdle for traders to get past, so in the meantime were just simply going to kill time in this region. However, on a daily close above the 1.30 level I am more than willing to not only by this market but hang on to the trade. For me, the bullish flag that we are forming is just the beginning of a massive trend change as the 1.20 level is probably a level that you won’t be seeing anytime soon.
If we do get some type of shock headline coming out due to the Brexit situation, then obviously it will be detrimental to the trend, but at this point I think that it’s very unlikely to happen and I do believe that it’s only a matter of time before we get that bullish momentum to the upside. If we did break down, I believe that the 1.25 level underneath of course would be massive support, and therefore I would be interested in buying down there as well. Regardless, I think it’s only a matter of time before this market takes out to the upside as the British pound is so historically cheap. I still to this day get a lot of emails about “how much lower can the British pound go? Especially once they leave the EU?” Quite frankly, once the market knows what’s going to happen and under what circumstances, and that in and of itself will reason enough of this pair to rally.
