The British pound initially fell on Wednesday as the 1.26 level continues to be a massive barrier. If we can break above the area, then it’s possible that the market will get an opportunity to go much higher. That being said, I think what we have is a situation where we are trying to build up enough pressure to break down, but there are far too many things out there that are working against a longer-term rally.
Breaking above the 1.26 level opens up the possibility of an attempt to reach the 50-day EMA, which is sitting underneath the 1.28 level. If we can break above the 50-day EMA, then it’s possible that we could go higher, perhaps reaching the 1.30 level over the longer term. The 1.30 level is an area that I think has a significant amount of importance attached to it, due to the fact that the area is not only a psychologically important level, but it is also an area where we had seen a lot of support in the past. That being said, the market is going to continue to see this as an area that should have “market memory” attached to it.
If we were to break above the 1.31 handle, then it’s likely that the market could go much higher to reach the 200-day EMA. If we can break above the 200-day EMA, then it’s likely that the British pound will eventually go looking to reach the 1.36 level. In order for this to happen, we will have to pay close attention to the bond market, and whether or not interest rates are finally starting to drop in the United States. After the Federal Reserve Meeting Minutes, it looks as if there was more of a “risk-on” type of attitude out there, but I don’t know that it has changed a lot in the longer term.
When you look at this chart, you can see that somewhere near the 1.2475 level there is a significant amount of support. If we were to break down below there, then the market will unravel and go looking to the 1.22 level. In general, this is a market that is going to be very noisy, and we are most certainly at a major level.
