- The British pound has bounce significantly during the trading session here on Monday, to break above the top of the inverted hammer from the Friday session, as well as the 50 Day EMA.
- The uptrend line of course is something that a lot of people have been paying attention to, as it is so obvious for longer term trades.
- Now that we are above the 50 Day EMA, you have to ask the question as to whether or not the uptrend is going to continue.
Technical Analysis
Being above the 50 Day EMA is bullish obviously, but we also have a major trend line underneath that continues to offer support. If we were to break down below the uptrend line, and clear the 1.3350 level to the downside, then we could see something rather significant as far as a drop is concerned, perhaps a move down to the 1.31 level where the 200 Day EMA currently resides. However, I think that is very unlikely at the moment, mainly due to the fact that it would probably take the US dollar strengthening against almost everything. Ultimately, this is a market that remains bullish over the longer term, but we are sitting in an area that could dictate where we go for the next several handles.
Keep in mind that the US dollar of course is being thrown around by the idea of what the Federal Reserve may or may not do, as traders are looking for some type of handout in the form of lower interest rates. Ironically, the economic numbers coming out the United States have not shown an economy that is cooling off, so whether or not the Federal Reserve will actually cut anytime soon remains to be seen. However, it’s also worth noting that the British pound has outperformed other currencies against the US dollar for a couple of years now, even on the way down.
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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.