- The British pound initially rallied during the trading session on Friday, testing the 50-day EMA as it’s now offering resistance.
- But I would also point out that the 1.3350 level is significant support.
- If we were to break down below that level, that could open up a drop down to the 1.32 handle where the 200-day EMA is rapidly approaching.
On the other hand, if we can break above the 1.35 level, then it’s likely that the British pound could continue the overall uptrend. It’s probably worth noting that we are at a major point of inflection. The US dollar is starting to fight back against multiple other currencies. The British pound has been stronger for quite some time than most other currencies against the US dollar, both on the way up, but also on the way down.
Last year we ended up seeing the British pound dropping against the U S dollar, but not as rough and not as rapidly against other currencies such as the Canadian dollar or the Euro or whatever. So, I do think this is going to be an interesting market to watch because of this breakdown. Then I think quite frankly, the US dollar will probably strengthen against multiple other currencies.
On a Move Higher
If the market does rally from here, we could go as high as 1.38, but really at this point in time, it’s interesting because the economic announcements in the United States continue to be stronger than anticipated overall. And I think that’s the story here. I think traders are going to head back to the US. It’s worth noting that we are in the middle of summer and trading is pretty quiet this time of year. So I’m not looking for huge moves and at least not right away, but we are leaning towards a breakdown. Now, if we get it, I won’t hesitate to act. But right now, it looks like we’re just hanging out just above that support level, trying to decide if this is the real deal.
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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.