- The British pound initially tried to break above the 200-day EMA on Friday but has given back those gains to show signs of weakness.
- By doing so, it is a technical trade.
- I think this is as much a technical trade as anything else, given the 200-day EMA’s strong influence on market behavior.
- However, it’s also worth noting that Friday’s PMI data impacted the market—manufacturing PMI in the UK came in lower than expected, while services PMI was higher than anticipated but included negative revisions.
In the United States, we have seen services PMI come out lower than anticipated, but manufacturing coming out higher to previous announcements. So pretty mixed story here. And I think at this point in time, you have to look at this through the prism of whether or not we are actually a little overextended, which I think that might be part of the case here as well. Ultimately, I think we need to watch this area between the 200-day EMA and the 50-day EMA for potential consolidation.
Is This Enough Info?
I don’t know that we have enough information to get moving longer term one way or the other at the moment, but I certainly am cognizant of the fact that a move above maybe 1.2750 or even 1.28 could open up a much bigger move, but that is a significant resistance barrier that will have to be dealt with and will more likely than not be very difficult to deal with for those who are trying to send the market higher.
On the downside, if we were to break down below the 1.25 level, I think at that point in time, the British pound falls under serious pressure, and this would probably be a pro-US dollar move across the forex world. So we’ll see how that plays out. But this is how I see the British pound at the moment. I think it is in a state of flux. We’ll have to see whether or not the trend changes or if this was just simply a relief rally.
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