- During trading on Wednesday, we have seen the British pound drop pretty significantly against the US dollar, reaching toward the 1.3550 level, an area that has been important a couple of times in the past.
- However, at the end of the day we have seen the market turned around to show signs of life, so with that being the case, I think you have a situation where there is a lot of noise out there, but at the end of the day, we also have to keep in mind that it is Non-Farm Payroll announcement day on Thursday, and that will cause a lot of volatility with the US dollar itself.
Technical Analysis
The technical analysis for the British pound is rather strong against the US dollar, but it is probably worth noting that the session on Wednesday was a bit ugly for the British pound, but ultimately a lot of this could have been a certain amount of covering as far as the USD is concerned, due to the fact that session on Thursday could be significant as far as volatility is concerned. Furthermore, you have to ask the question as to what happens when the US produces more jobs than originally thought?
If that’s going to be the case, then I think a lot of people will be looking at this through the prism of whether or not the US dollar is “too cheap”, or if we need to see higher pricing. I have been in the market for 18 years, and I can tell you that the idea of the GBP/USD pair at 1.60 is not necessarily anything that I find extraordinary, although I get a lot of questions about whether or not this pair could go any higher. Of course, then again, this could also be the top. A prudent trader will recognize both things are very possible. Ultimately, I think the close on Thursday will be very important, but keep in mind there will be European traders out there on Friday trading, despite the fact that the Americans will be gone. The 50 Day EMA sits at the 1.3442 level and is rising so that could offer support on any pullback as well. The 1.38 level above seems to be significant resistance.
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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.